Tuesday, March 1, 2022, 6:44 pm
News Flash Archive
Complicated issues have arisen in the Express Grain bankruptcy, so much so that today the court postponed the long-awaited Section 557 Final Determination Hearing from March 4 to March 31.
The docket entry today indicates that the hearing is expected to last for an entire week.
Section 557 sets forth the bankruptcy rules for dealing with farm commodities that get trapped in bankruptcy proceedings such as in the Express Grain case.
There are a host of technical issues relating to discovery, confidentiality, and conflicting bankruptcy court rules that were dealt with in an emergency "status conference" held today, where various parties asked the court to clarify which rules control, and how they should proceed in putting together their proof for the upcoming "final hearing."
Some of the issues left for the court to decide at that March 31st hearing are:
1. Did Express Grain own any grain at all, given that its grain warehouse licenses were revoked "from the beginning" and it was thus unlawful for EG to store or sell grain?
2. When the farmers delivered their grain to EG, did EG take immediate ownership of the grain, or did the farmers retain ownership until they received payment from EG?
3. Was it lawful for EG to issue warehouse receipts to grain purchasers UMB Bank, Macquarie, and StoneX as a method of indicating that those firms owned the grain still kept in the EG warehouses, and if not, is some other proof of ownership (such as proof of payment) sufficient to confirm ownership of the grain to those parties?
4. Did EG in fact sell more grain than it actually owned in September 2021?
5. Did UMB Bank have a collateral interest in grain that EG actually did own, and if so, how much grain was left for EG to own outright (and hence for UMB to have a collateral interest in) after EG sold 3.5+ million bushels to StoneX and Macquarie behind UMB Bank's back?
6. In the case of those production lenders, such as Bank of Commerce, who had liens on the farmers' crops that they financed, but EG never paid the farmers for their crops, do those liens translate into a "security interest" in the grain to the production lenders, or to the farmers directly, or to nobody?
In the end, all these issues pit UMB Bank, StoneX, Macquarie, the farmers, and the production lenders against each other in one or more ways.
In a bankruptcy, the creditors with "secured debt" take precedence over creditors with no collateral security. It's not clear where persons with "bailments" (that is, persons whose property was being held by the debtor but not actually owned by the debtor) fit in as far as priority, and therefore ultimate chances to be paid.
The farmers are owed around $41 million for grain they delivered to EG but for which they never received payment from EG.
On top of all this, there are other creditors who are owed tens of millions of dollars by EG who have no security or priority at all, who will no doubt come out the worst.
In all, EG owes its creditors $165 million. Its physical assets sold at auction last Friday for around $26 million. EG anticipates that it will have collected $57.5 million in additional cash by April 1.
That would leave the majority of EG's debts unpaid when all is said and done.
To read all our coverage of the EG bankruptcy case, please see here: Taxpayers Channel complete coverage of the Express Grain bankruptcy case
As of Tuesday evening, the court has not yet signed and published its order approving the sale of EG's assets, nor disclosing the precise price or the purchaser's name. UMB Bank made the highest bid of around $26 million at Friday morning's auction.
John Pittman Hey
The Taxpayers Channel
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