Judge approves auction date for Charles City Simply Essential property and equipment

By Bob Steenson, bsteenson@charlescitypress.com

The auction for the Simply Essentials buildings and equipment — likely to bidders who would reopen the Charles City plant as a chicken processing company — will take place on Wednesday, Aug. 11.

Judge Thad Collins, bankruptcy judge for the U.S. Bankruptcy Court for the Northern District of Iowa, approved the order, setting in place the procedures for the auction.

As a result of an agreement among the bankruptcy court trustee and attorneys representing two potential bidders, the former owner of the company, the primary mortgage holder, and several creditors to the bankruptcy estate, the auction process was moved back 16 days from an original proposal by the trustee to hold the auction on July 26.

According to the procedure approved by the judge:

• All parties desiring to take part in the bidding process need to notify the trustee, Mason City attorney Larry Eide, no later than Thursday, Aug. 5.

• All the parties that want to take part in the bidding need to provide the trustee with a good faith deposit of $500,000 either in the form of an irrevocable letter of credit or a cash deposit, no later than 5 p.m. Friday, Aug. 6.

• All the parties that want to take part in the bidding need to provide the trustee with evidence that they have the financial ability “to consummate the sale transaction” no later than 5 p.m. Monday, Aug. 9

• The auction will take place via telephone conference beginning at 11 a.m. Wednesday, Aug. 11.

• The auction bidding will start with the bid of $9.5 million that had originally been accepted by the trustee from Pure Prairie Farms Inc., a new company that includes people who were former suppliers of chickens to Simply Essentials.

The next bid must be for at least $200,000 more, so $9.7 million, and subsequent bids must be at least in increments of $100,000.

Eide had initially accepted Pure Prairie Farms’ offer of $9.5 million for the Simply Essentials properties, processing equipment and other assets, saying it was the best offer available at the time, but then International Poultry Breeders LLC, doing business as The Best Dressed Chicken, made an offer of $10 million.

That offer prompted Eide to seek permission from the judge to reopen the bidding through a formal auction, but during a telephone hearing held July 16, several creditors objected to Eide’s initial timeframe to hold the auction on July 26, saying that was not enough time to make sure that questions about the sale and other potential liabilities had been answered.

One of the creditors, ARKK Food Co., a company that had a marketing contract with Simple Essentials and said it was owed millions of dollars in commissions for sales, said it was concerned that a great enough effort had not been made to market the Simply Essentials assets, resulting in too low a selling price, and suggested any auction be delayed 60 days or more to answer that and other questions.

But a representative of the company that Eide had hired to help sell the assets described the efforts that had been made, saying, “The information has been public. It has been unrestricted. We’ve sent thousands of emails, made tons and tons and tons of phone calls, and we’ve got a laundry list of details that can support that.”

David Barkoff, senior vice president for that company, Heritage Global Partners, said at the hearing, “What we are saying today, loud and clear, is time is not the answer. Time is not your friend in this situation. And we are fearful of what could happen if this does get extended.”

Judge Collins ordered the parties to get together and figure out what information was still needed and come up with a plan to extend the auction date no more than about 30 days.

The order that Judge Collins signed, which had been prepared by Trustee Eide, indicated that it had been approved “as to form and substance” by the attorneys representing The Best Dressed Chicken; Pure Prairie Farms Inc.; ARKK Food Co.; and a group of creditors consisting of former chicken suppliers.

It was also approved by the Federal Agricultural Mortgage Corp. (Farmer Mac), which holds a first mortgage of more than $18 million; and Pitman Farms Inc., the California company that had purchased ​Simply Essentials in 2017, closed it in 2019, and that still claims a first mortgage on a parking lot and live barn for almost $5 million.