Thursday, May 25, 2023, 6:46 pm
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Dr. Michael Coleman, who owned close to 99% of the Express Grain enterprise, has filed an administrative expense claim against the bankrupt company for $2,779,869.
This comes as a surprise to some, since Dr. Coleman is considered an "insider" to EG due to his ownership interest in the business. He has not been accused of any wrong doing in the EG collapse.
According to Dr. Coleman's petition, he loaned that money to EG after it had filed for bankruptcy, so that payroll could be made:
On the Petition Date [9/29/2021, the date the bankruptcy was filed], the Debtors' biodiesel operations were operating with little or no liquidity and unable to pay employees, expenses or other necessary operating expenses for its business.
Following the Petition Date, on or about October 1, 2021, and upon the request of Debtors (and due to the immediate need of Debtors), Dr. Coleman loaned monies to Debtor in expectation of repayment to enable the Debtor to pay employee wages, costs of operation, utilities and such other necessary expenses to prevent sudden loss of operations, cessation of operations, all of which enabled Debtors' estate to continue to generate product for sale and, in fact, preserved and protected the value of the Debtors' estate.
The loan Dr. Coleman made to Debtor Express Grain Terminals post-petition was in the amount of $2,779,869.
As noted, the amount loaned post-petition added value to the estate by preserving operations, retention of employees and protection / preservation of estate assets, and the loan has not been repaid. Dr. Coleman seeks repayment of the Loan as an administrative expense of the estate.
The specific language used by Dr. Coleman is important. To qualify as an administrative expense, which has the highest priority for payment by the bankrupt estate, the claim must have been for purposes crucial to maintaining the value of the company, to keep it a "going concern," or otherwise preserve it in a way that makes possible the reorganization of the company to survive bankruptcy, or to maximize payments to creditors.
Administrative expense claims, if approved by the court, get paid first in line, before both secured and unsecured claims.
Dr. Coleman's petition for payment may be seen here: Dr. Michael Coleman Motion for Payment of Administrative Expense Claim
Dr. Coleman is represented by H. Scot Spragins from Oxford.
Express Grain's attorney Craig Geno asked the court for more time to answer Dr. Coleman's claim. That's because the entire EG estate will be turned over to the Liquidating Trustee on June 7, 2023. At that time, Express Grain will cease to exist, and the trustee will be litigating claims and paying some of the creditors from the liquidated assets of the old company.
Geno's response, however, contains some surprising language:
The Liquidating Trustee does, however, plan to object to the Admin Expense Motion in its entirety.
In addition, the Liquidating Trustee must explore the possibility of including a counterclaim in response to the Admin Expense Motion, or filing a separate adversary proceeding which would seek to combine the Admin Expense Motion with the adversary proceeding under which the Liquidating Trustee may assert directors and officers claims back against Dr. Coleman, who was an insider and should have been a decision maker at the Debtor during all times, prepetition.
Thus, Geno wants to preserve this matter for a decision by the Liquidating Trustee when she assumes control in early June.
Geno asks the court for the following:
Accordingly, the Debtor moves the Court for an order granting it an additional sixty (60) days within which to respond to the Admin Expense Motion (at which time the putative Liquidating Trustee will be the liquidating trustee), to make the decision as to whether or not the Liquidating Trustee should file a counterclaim or separate adversary proceeding seeking affirmative relief against Dr. Coleman and within which to engage counsel.
If the trustee decides to pursue claims against Dr. Coleman, it would be the first time that any public action has been taken by the bankrupt EG or its attorneys against either Dr. Michael Coleman or John Coleman his son. UMB Bank has already pursued both men in court separately for its tens of millions of dollars in losses in the EG collapse.
EG's motion for more time, filed by Mr. Geno, can be seen here: Express Grain Motion for Additional Time to Object to Administrative Expense Claim and Add Counterclaim
Today, the court granted EG's requested time extension. To view the court's order, see here: Order Granting Extension of Time to Object, Etc.
Dr. Coleman's administrative expense claim isn't the only one currently pending, however, and these claims, if allowed by the court, will further drain the limited cash available to pay any of the remaining creditors.
When EG collapsed, claims in excess of $210 million were filed, while the company liquidated for around $85 million. Farmers were unpaid for grain deliveries to the tune of around $40 million, even after the grain settlement was approved and paid. There are other vendors and contractors still owed at least $5 million in unsecured claims.
According to the most recent Monthly Operating Report filed, as of March 31, 2023, EG had only $2,084,758 left in the bank to wind down business and pay remaining claims.
According to its listing of bankruptcy related professional fees and legal costs, at that same time, $695,681 had been paid to the Geno Law Firm for legal services, and $1,992,594 had been paid to the CR3 management firm that took over running EG after the bankruptcy was filed.
To see the latest operating report, view here: Express Grain Monthly Operating Report ending March 31, 2023
No doubt, there will be additional legal costs and management fees since March 31.
To read all our coverage of the Express Grain bankruptcy case, see here: Index of Express Grain articles
John Pittman Hey
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