Friday, November 19, 2021, 5:51 pm News Flash Archive

In a series of revealing statements, Express Grain's bankruptcy attorney Craig M. Geno told the court in a November 15 filing that some (or "perhaps all") of the creditors claiming interests in the grain sold to EG last September, which includes the unpaid farmers, "are not going to be able to recover the full amount of their claims."

The filing may be seen here: Opposition to motion to appoint trustee

Express Grain (EG) filed Chapter 11 Bankruptcy on September 29, 2021, the day after UMB Bank called $70 million in loans and asked a court to liquidate the assets to repay them.

As reported by The Taxpayers Channel and others, EG appears to owe its creditors more than $115 million, while claiming assets of only $101 million. The bank is owed around $70 million, the farmers around $41 million, and others close to $5 million.

To read The Taxpayers Channel's reporting on this matter, please see here: Express Grain bankruptcy filings show more than $115 million in debts

Chapter 11 bankruptcy is taken when a company doesn't have the ability to pay its creditors the money owed. It gives the company time to reorganize its financing.

But usually, the creditors end up not being paid all they are owed. The bankruptcy trustee and the court divvy up the assets between the creditors. Sometimes the company is sold and the proceeds are used to partially pay the creditors.

EG now admits that will be the case in this bankruptcy as well. There won't be enough money to pay everyone in full.

Unfortunately, the farmers are at the end of the line when it comes to payouts. Creditors in a bankruptcy are classified differently, depending upon the type of debt they are owed.

Government claims and taxes are given first priority.

After they are paid, the "secured creditors" are paid their claims. In this case, UMB Bank and certain other lenders will be paid the $70 million they are owed, unless the money is exhausted first.

These "secured creditors" have their debt backed up by a pledge of collateral by Express Grain. In this case, EG has put up its land, buildings, equipment, and the commodities that it owns to back the "secured debt."

Finally, after the secured creditors are repaid, the "unsecured creditors" are left to divide up whatever money remains. Farmers, regular vendors, utility companies, etc. fall into this creditor class. The unsecured creditors are owed nearly $45 million, according to the most recent filings.

On November 3, dozens of farmers petitioned the court to appoint a trustee to liquidate EG and pay off the creditors. They claimed that EG was still wasting money and assets, is being mismanaged, and diminishing the creditors' chances at being repaid. Their motion can be seen here: Motion to appoint trustee

In its November 15 reply, Express Grain argues that the value of the company is best maintained by continuing the soybean processing activities while a buyer is sought, rather than proceeding directly to liquidation under a trustee.

Furthermore, EG states that the court has already appointed a "Chief Restructuring Officer" to help reorganize the company and to keep a watch on all expenditures and other decisions by the company's management.

Rather than completely shutting down EG, its attorney claims that "The best possible way those losses can be diminished is for the Debtor [EG] to continue as an ongoing business, to liquidate, through crushing, the pre-petition inventory of beans, collect the proceeds of the grain crushing processes related to soybean input, preserve those funds for distribution at a later date and to maintain the going concern value of the business to a prospective buyer or buyers."

EG claims that "processing the grain is a much more profitable enterprise than simply loading it on train cars and selling it on the spot market." That also permits the employees to continue to work. EG states that one of the company's most valuable assets is EG's experienced, long-time work force, which numbers close to 200 people.

EG claims that it "has already received a number of expressions of interest from purchasers of the Debtor [EG] and is scheduling site visits for those potential purchasers...."

Finally, EG's attorney informs the court that "the orderly, ongoing liquidation of the Debtor's [EG's] assets as a going concern is already underway."

The court has not yet ruled on the question of whether to appoint a trustee to liquidate the company and (partially) pay the creditors.

John Pittman Hey
The Taxpayers Channel

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