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Express Grain claims it has $41.6 million in "segregated accounts" collected to help pay off its creditors

Thursday, February 24, 2022, 7:43 pm News Flash Archive

Soon after Express Grain filed for bankruptcy on September 29, 2021, it requested that the court allow it to use the collateral and cash being generated by operations to pay for some continuing business expenses, such as payroll, supplies, power, gas, shipping, etc.

Under bankruptcy rules, this could not include paying off creditors from debts incurred before the bankruptcy was filed. Pre-petition creditors must be paid at the end of the bankruptcy according to their priority and how much cash is available to divide up between them.

Over the objections of the farmers and the crop lenders, the court allowed EG to continue to crush beans (for which the farmers had not yet been paid) and to sell inventory and finished products, under the theory that more money could be banked for payment of creditors by allowing EG to continue operating for a short time. Additionally, it was thought that finding a purchaser for EG's assets would be easier if EG were still in operation.

The "Use of Collateral and Cash" Order runs out tomorrow. EG has asked it to be extended for another two weeks to help pay for the "wind down" of the company after its assets are sold at auction tomorrow.

The court order will only permit EG to spend money that falls in the budget that the court approves. Any excess money collected goes into a separate account to be used by the court to pay off creditors when the time comes.

In addition, the money collected from any products sold from "pre-petition" inventory must be placed in a segregated account to protect the lien holders and other creditors to whom the grain was pledged as collateral.

Thus, there are now four bank accounts holding tens of millions of dollars in cash which has been generated and collected to be used to help pay off the creditors.

The new budget, which has been submitted by EG to the court for approval, projects out through April 1st, 2022, and contains some interesting information. The new budget may be seen here: EG projected "Wind Down" budget through April 1, 2022

According to the budget, as of tomorrow, EG expects to have $41.6 million combined in the four segregated accounts, most of which will be used to help pay off creditors.

If allowed to continue wind down operations, EG expects that number to rise to $57.5 million, according to the budget submitted to the court.

EG believes that it still has $11 million worth of inventory and finished products to sell, which it intends to sell off by March 18.

Payroll costs, on the other hand, are expected to plummet starting next week, dropping from $161,000 per week to $41,000 the week ending April 1st. This would correspond with a 75% reduction in employees in the next five weeks.

In the 3 weeks just ended, EG spent around $365,000 on natural gas, propane and hexane, used in the manufacturing processes. Those costs are expected to disappear completely going forward next week.

Freight costs will continue for three more weeks at around $116,000 per week, at which point EG expects to have sold all its products and shipping costs will disappear.

The week ending April 1, EG must pay the bankruptcy court its quarterly fee of $250,000, which is based upon the incoming revenue of the company.

In the last three weeks, EG has incurred $355,000 in chapter 11 professional fees, which would include legal costs and bills from CR3 for providing restructuring management.

EG expects to incur an additional $412,000 in chapter 11 professional fees payable by April 1.

According to the latest filings, EG owes $165 million to banks, farmers, the government, and other creditors. See our reporting here: Express Grain owes $60 million more than first believed to its creditors

John Pittman Hey
The Taxpayers Channel

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