Simply Essentials auction winner withdraws bid for company assets

By Bob Steenson, bsteenson@charlescitypress.com

The saga of the Simply Essentials facility in Charles City continues as companies associated with a Jamaican chicken processing company have now withdrawn what was considered the winning auction bid for the property, after another company that wants to buy the property protested.

International Poultry Breeders LLC, doing business as The Best Dressed Chicken, had offered $9.5 million as the highest and only bid for the Simply Essentials assets at an auction held by the U.S. Bankruptcy Court trustee in the case on Aug. 11, but now that company says it no longer wants to purchase the property.

After the auction, the trustee, attorney Larry Eide of Mason City, had filed a motion asking the bankruptcy court judge to grant permission for him to sell the assets to International Poultry Breeders (IPB), which is a subsidiary of Jamaica Broilers Group Ltd.

A hearing on that motion had been set for Sept. 9, but various objections to the sale were filed and the hearing was continued to Tuesday, Sept. 28.

Before that latest hearing was held this week, however, IPB filed another motion, withdrawing its offer to purchase the Simply Essentials assets and urging the court to approve the trustee selling the assets to another company that had made a previous offer for the facility.

Pure Prairie Farms Inc. is a relatively new company that includes some of the farmers who had been under contract to sell chickens to Simply Essentials before the chicken processing plant was closed in August 2019.

Pure Prairie Farms had originally made an offer of $9.5 million to purchase the Simply Essentials assets, and Eide had accepted that offer and was in the process of getting permission to sell the assets to Pure Prairie Farms when Wincorp International Inc., an associate of IPB and another subsidiary of the Jamaican Broilers Group, offered $10 million.

With the higher offer in hand, Eide received permission from the bankruptcy court to hold an auction for the Simply Essentials assets.

But IPB was the only company to bid at the auction, and won the auction with the opening bid of $9.5 million.

Pure Prairie Farms objected to the sale, arguing that if Simply Essentials was going to be sold for $9.5 million, the original sales agreement with Pure Prairie Farms should be honored.

But most importantly, Pure Prairie Farms said in its motion objecting to the sale, Pure Prairie Farms would offer terms to contracted chicken growers that would be far more beneficial to the growers than the terms that The Best Dressed Chicken would offer, to the tune of an additional $3.5 million a year.

Many of the potential chicken growers would not be able to operate successfully under the terms that The Best Dressed Chicken offers, Pure Prairie Farms said, and since many of those potential growers are creditors of the Simply Essentials estate, the fact that they would benefit more from the sale to one company than another should be considered by the bankruptcy court..

The amount Simply Essentials is being sold for, assumed to be $9.5 million regardless of which company it goes to, minus property taxes, sales expenses and other administrative costs, is far less than the amount Simply Essentials owes to secured creditors such as mortgage holders.

Unsecured creditors like the former chicken growers will likely see nothing from the proceeds of the sale, Pure Prairie Farms argued, so a sale that will potentially prove to be of better benefit to those creditors should be valued more highly by the court.

After IPB filed its motion withdrawing its bid, Eide filed for another continuance of the bankruptcy court hearing, saying he had contacted Pure Prairie Farms’ attorney, “seeking to revive its prior bid,” but that he needs more time “to address the objections and the current status of this matter.”

The bankruptcy court judge granted that motion, continuing the hearing to a later date to be determined.

In related action, the two apparent secured creditors, the Federal Agricultural Mortgage Corp. (“Farmer Mac”) and Pitman Farms, both filed separately asking the bankruptcy court to remove an automatic stay in bankruptcy cases that prevents creditors from pursuing action against the debtor (Simply Essentials) outside of the bankruptcy.

Farmer Mac said Simply Essentials owes it at least $15.28 million and “Farmer Mac’s interest in the collateral is not being adequately protected.”

“Farmer Mac has been forced to spend over $350,000 in protective advances for things such as utilities, security and property insurance in order to preserve the collateral’s value,” it wrote. “Farmer Mac requests relief from the automatic stay to allow Farmer Mac to exercise its remedies against the collateral pursuant to applicable state law.”

Pitman Farms, the company that purchased Simply Essentials in 2017 and closed it in 2019, holds a mortgage of about $4.9 million on a parking lot and live barn, and it, too asked the bankruptcy court to lift they stay so Pitman Farms can pursue other remedies.

A hearing on the two motions for relief from the bankruptcy stay has been set for Oct. 15, but no new date has been set for the hearing on the sale of the Simply Essentials assets.