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Farmers ask court to liquidate Express Grain

Friday, January 21, 2022, 7:19 pm News Flash Archive

Late this afternoon, virtually all of the farmers who are represented by attorneys in the Express Grain bankruptcy case filed a joint motion with the court asking that the company be immediately liquidated.

The petition filed by at least 110 farmers and plantations, may be seen here: JOINT MOTION TO CONVERT TO CHAPTER 7 LIQUIDATION

If the court denies their request, the farmers ask that a Chapter 11 Trustee be appointed to liquidate Express Grain and finish off the bankruptcy case.

These farmers, as well as a number of others, all delivered grain to Express Grain but were never paid. EG filed for bankruptcy protection on September 29, 2021, and around $41 million is still owed to the farmers.

In addition, EG owes approximately $70 million to UMB Bank. In all, EG appears to owe at least $165 million in debts, but has assets worth only around $96 million, according to their latest filings.

The farmers are frustrated that, since the beginning, the court has permitted EG to sell and/or crush the farmers' grain, while still leaving them unpaid.

The case grinds on and on, with no farmers being paid, and with EG blowing through mountains of grain and expenses, with the court's consent.

Meanwhile, the Mississippi Department of Agriculture and Commerce will be holding a hearing January 24th to investigate whether EG committed fraud in its application to renew its warehouse licenses. See our reporting on this ongoing investigation here: UMB Bank, Express Grain ask court to protect Express Grain from MS Department of Agriculture fraud investigation

In describing MDAC's investigation into EG's warehouse licenses, the farmers claim:

... the State's Motion asserts that the State has compelling reasons to believe that EGT secured the Licenses after submitting to the State certain audited financial reports that were materially altered from the time they were issued by the Business Debtor's accountant and their submission by EGT to the State. If that is the case and the Licenses were secured by misrepresentations and/or fraud, they will likely be vacated, and EGT will be left without the necessary licenses to conduct business in the State of Mississippi going forward. Further, if the Licenses are deemed void ab initio, EGT will have effectively operated illegally since they were re-issued by the State in June 2021.

Arguing further:

If the facts alleged by the State prove true, the Debtor never had any right to use the grain and grain proceeds in this case and the significance of the loss to All Moving Farmers and their production lenders, who have consistently resisted the continued crushing operations by Business Debtors will have proven to be extreme.

The farmers also claim that "key executives for the Business Debtors have recently resigned as announced by the CRO on January 19, 2022," but no names are given in the farmers' filing.

The farmers claim:

... it appears that the Debtor has, upon information and belief, burned through "cash collateral" exceeding $70,000,000.00 ... in less than 120 days. [Comprised of $43,733,678.00 of "Aggregate Sales" of grain and grain products as well as "Disbursements (Operating)" of $31,047,366.00 through January 14, 2022 per CRO's weekly report.]

The farmers urge:

All Moving Farmers were fraudulently induced by EGT's representations that it was properly licensed and financially sound and, in reliance, shipped grain to EGT who had no legal right, power, or authority to receive grain for storage or sale. More than sufficient "cause" exists to convert the Business Debtors' present Chapter 11 "reorganizations" to Chapter 7 liquidations or alternatively to appoint a Chapter 11 Trustee so that this matter might have a precipitous end in an organized, non-operating section 363 sale. If the Business Debtors cease to operate and can no longer proceed as viable economic entities, they cannot effectuate nor consummate any meaningful plan of reorganization or liquidation ("Plan") prospectively filed in this matter. If the Business Debtors cannot operate legally, a CRO is no longer necessary and these cases should be administered by either a Chapter 7 or 11 Trustee to wind down the Debtor's business operations and conduct a sale of its assets for the benefit of all creditors to the Business Debtors' estates.

The farmers further claim:

The Business Debtors and UMB Bank, the alleged largest secured creditor with purported liens encumbering all EGT's assets, have for some time been candid with this Court that a reorganization is not forthcoming, but that all roads lead to a potential sale of substantially all of the Business Debtors' assets to yet identified suitors who have ... per the CRO's testimony to date ... shown lukewarm interest, at best. Upon information and belief, no potential buyers are interested in the crushing operation for which the Business Debtors' and the CRO have justified holding the grain and grain proceeds hostage to the crushing operation since the Petition Date.

The farmers claim that all this post-petition activity has really been about trying to collect the moneys owned to UMB Bank:

... the real and potential fraud perpetuated upon the Farmers both prior to and following the Petition Date is sufficient "cause" under 11 U.S.C. Section 1112 to end this apparent exercise in asset recovery for the benefit of one creditor.

Since the farmers have argued that, due to license fraud, the grain that EG took possession of was probably not theirs to dispose of:

Business Debtors' pending Chapter 11 proceedings should no longer continue to be used as a mechanism to maximize the recovery on behalf of but one alleged creditor, or a hand-full of same, from assets that are not even likely to be property of the Business Debtors' purported estates.

As of now, no hearing has been set on the farmers' motion, but Bank of Commerce, First South Farm Credit, and ACA have all joined in their request.

John Pittman Hey
The Taxpayers Channel

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