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Bankruptcy court finally confirms Express Grain Plan of Liquidation

Monday, March 27, 2023, 8:06 pm News Flash Archive

Last Friday, the federal bankruptcy court entered an order finally confirming Express Grain's Plan of Liquidation.

The Plan was first filed August 15, 2022 by EG's bankruptcy attorney Craig Geno.

Since then, various objections have been filed, by UMB Bank, by the Mississippi Development Authority, by Riceland Food, the Disclaiming Farmers, the United States Trustee, and several others.

In the end, all the objectors' concerns were addressed or agreed to in the final order confirming the Plan. The plan goes into effect 60 days after the entry of the order.

To read the court's order confirming the Plan of Liquidation, see here: Order Confirming Express Grain Plan of Liquidation

According to the Plan of Liquidation, all of EG's remaining assets, which mostly consist of cash being held in escrow for the payment of claims, legal fees, and other bankruptcy expenses, will be handed over to a new entity called "Express Grain Liquidating Trust." The court agreed to appoint a CR3 employee, Heather Williams, to head up the liquidating trust.

According to the Plan, liquidation activities will chiefly consist of suing people that EG had paid for legitimate services and products to "claw back" some of that money. That money will then be used to pay legal costs, attorney fees, CR3, and others, and if there is any money left over, creditors. To read the Plan of Liquidation, see here: Beware the claw backs: Express Grain threatens to sue its own creditors and other companies that did business with it

After this Plan was first filed, several objections and the need for various clarifications sprang up, and so on October 17, 2022, EG filed a First Amended Disclosure Statement, which provides expanded details about the Plan of Liquidation. To see our reporting on this modified disclosure, and some of the matters it addressed, see here: Bankrupt Express Grain seeks to correct various problems with some of its previous court filings

In early March 2023, multiple creditors and others filed additional objections to the confirmation of the Plan of Liquidation, including:

Disclaiming Farmers Objection to Confirmation of Plan of Liquidation

MDA Objection to Confirmation of Plan of Liquidation

UMB Bank Reservation of Rights to Confirmation of Plan of Liquidation

MS Department of Revenue Objection to Confirmation of Plan of Liquidation

Riceland Foods Objection to Confirmation of Plan of Liquidation

US Trustee Objection to Confirmation of Plan of Liquidation

The "disclaiming farmers" objected that the plan didn't include some language preserving their right to sue UMB Bank and others in state and federal courts:

. . . the Disclaiming Farmers reserve all rights to pursue claims they have, or may have, against any non-debtor third party, including but not limited to the Debtors' lenders, auditors, officers, directors, and principals, whether relating to false statements, misrepresentations and omissions made to the Mississippi Department of Agriculture and Commerce ("MDAC") and/or to the Disclaiming Farmers, regarding the financial condition of the Debtors, or (ii) otherwise.

In the end, the dispute was settled by the court inserting the following language in the Order Confirming the Plan:

No provision of (a) the Plan, including, but not limited to, Articles V.D., V.G., VII, and VIII, or (b) this Order, shall affect or limit any rights or claims that any of the "Disclaiming Farmers" (as defined in the Settlement Order) obtained or preserved under the Settlement Order.

This language appears to kick the can down the road, as it does not go as far as the Disclaiming Farmers would have liked it to go.

Mississippi Development Authority objected that the Plan appeared to give the former officers and directors a discharge from any liability they might have for cheating MDA out of its $750,000 grant to EG. The court added language to make sure that doesn't happen.

UMB Bank's concerns were addressed by the court with the following language in the Order Confirming the Plan:

(a) The treatment of the Secured Claims of UMB under Class 9 of the Plan is amended to add the following language: To the extent there are any remaining assets in which UMB asserts a lien or security interest, the Liquidating Trustee shall obtain either a court order or consent from UMB prior to any sale of UMB's collateral or use of resulting cash collateral. UMB's deficiency claim shall be included in Class 11 as an unsecured claim.

(b) Article V., Section G. is amended to add the following language: For the avoidance of doubt, the injunction provided for in this paragraph does not extend to Debtor's officers or directors.

(c) In the event the Liquidating Trustee reaches a settlement or compromise resulting in a payment of over $100,000, the Liquidating Trustee shall seek court approval of such settlement.

(d) Unless expressly identified and modified by the Plan, nothing in the Plan supersedes the Memorandum Opinion and Order Approving Joint Application to Compromise Controversy [DK #2785] (the "557 Compromise Order") or any orders (the "Sale Orders") approving the sale of assets, including without limitation the Order Granting Motion to Sell Substantially All of the Assets Owned by Express Grain Terminals, LLC, Free and Clear of Liens, Claims and Interests, with Liens Attaching to Proceeds of Sale, Outside the Ordinary Course of Business [DK #2708].

(e) The Court shall retain jurisdiction to interpret, enforce, or otherwise resolve issues related to the 557 Compromise Order or the Sale Orders.

(f) Nothing in the Plan, or a party's acceptance or acquiesce to the Plan, affects, modifies, or impacts the debts, liabilities, or obligations owed to a non-debtor entity under applicable law by another non-debtor entity or entities.

Mississippi Department of Revenue's objection was addressed by the court as follows:

The Objection of the MDOR is resolved by the Debtor's agreement that any administrative expense claim owed to the MDOR shall be paid on or before the Effective Date of the Plan. The Reorganized Debtor/Liquidating Trustee shall timely submit returns and remit payment, including allowable penalties and interest, for all taxes due or coming due, as required under applicable Mississippi state law and any allowed and unpaid taxes, penalties and interest on unfiled returns shall be paid and filed timely. Should the Reorganized Debtor/Liquidating Trustee fail to so timely file and pay, MDOR may proceed with Mississippi state law remedies for collection in the amounts due and/or seek such relief as may be available from the Court, subject to the default language contained in the remainder of this agreement. Neither the Plan, nor the order confirming it, inhibit MDOR's ability under its statutory authority to transfer the liability for unpaid trust fund taxes to or to collect those taxes from non-debtor third parties. For that reason, neither the Plan nor the Chapter 11 case shall have any effect on MDOR's statutory rights against any non-debtor third parties. Further, in the event the Debtor defaults with respect to payment of any administrative, priority or post-confirmation obligation to the MDOR, upon notice to the Debtor (or the Liquidating Trustee) of the default, and the Debtor's/Liquidating Trustee's inability to cure the default after 14 days notice thereof, the MDOR is free to engage in collection activity with respect to the claim it asserts unless Debtor has interposed a good faith objection to claim filed with the Clerk of the Court in this case.

Riceland Foods' objection was that the court had already allowed it an "administrative claim" of $257,332.44, which is supposed to have the highest priority to be paid. In addition, Riceland has almost $200,000 in unsecured debt owed to it by EG.

The court memorialized a settlement in the Order between Riceland and EG:

(a) The Debtor (or the Liquidating Trustee) shall pay the sum of $200,000 to Riceland, on or before the Effective Date, in full satisfaction of all administrative expense/reclamation claims of Riceland and in full satisfaction of that certain Agreed Order [DK #2835] previously entered in this case;

(b) The Debtor releases all avoidance claims, claims under Chapter 5 of the Bankruptcy Code, and any and all other claims it may have against Riceland and such release is binding upon the Liquidating Trust and Liquidating Trustee;

(c) The difference in the allowed amount of the Riceland claim in the Agreed Order [DK #2835] of $257,332.44, and the payment to Riceland of $200,000 shall be an allowed, additional unsecured claim in the sum of $57,332.44, to be added to the Riceland general, unsecured claim in Class 11: General Unsecured Creditors;

(d) The Debtor waives any and all objections to Riceland's unsecured claim, as amended, and upon receipt of the $200,000 payment provided herein, Riceland shall be deemed to have an allowed unsecured claim in the amount of $256,959.05; and

(e) The Plan may not go effective, despite any language to the contrary in the Plan or this Agreed Order, unless and until Riceland has been paid its $200,000 settlement amount. Accordingly, Riceland amends its vote of rejection of the Plan as a Class 1 and Class 11 claimant, and is deemed to have voted to accept the Plan for its Class 1 vote and its Class 11 vote.

The objection of the United States Trustee was addressed by the court thusly:

The Objection of the UST is resolved by the agreement of the Debtor referenced in Paragraph 9 with respect to the Debtor not receiving a discharge of any debts or claims against it, and with respect to the language regarding the injunction set forth therein and incorporated here by reference. Further, the Debtor agrees that all monthly operating reports will be filed on or before the Effective Date and all fees due to the office of the UST that are owed, shall be paid on or before the Effective Date.

Once the court addressed all the objections, it concluded in part with the following language:

It is, therefore,

ORDERED, ADJUDGED AND DECREED, that the Plan is confirmed. It is, further,

ORDERED, ADJUDGED AND DECREED, that the Debtor shall timely pay to the UST any and all post-confirmation quarterly fees . . . until such time as this case is converted, dismissed or closed by the Court. Additionally, the Debtor shall timely submit to the UST post-confirmation reports in the format prescribed by the UST until such time as this case is converted, dismissed or closed by the Court. It is, further,

ORDERED, ADJUDGED AND DECREED, that the provisions of the Plan and this Agreed Order shall bind the Debtor, the Liquidating Trust, Liquidating Trustee, and each and every creditor, whether or not the claim is impaired under the Plan or whether or not the holder of the claim has accepted the Plan. It is, further,

ORDERED, ADJUDGED AND DECREED, that as of the date hereof all of the property of the Debtor shall be free and clear of all claims and interests of creditors of the Debtor, except for the obligations that are imposed or continued in the Plan or this Agreed Order, subject to the provisions of Paragraph 11, supra, with respect to the settlement of the Objection of the MDOR as well as settlement of the objections of the UST with respect to the injunction in the Plan and the free and clear language of the Plan and of this Agreed Order. It is, further,

ORDERED, ADJUDGED AND DECREED, that all claims recoverable under Sections 547, 548 and 550 of the Bankruptcy Code, including, but not limited to, those claims specifically enumerated in the First Amended Disclosure Statement [DK #3001) (and limiting orders approving the same) as being reserved, and all of the claims owed to or in favor of the Debtor that are not settled pursuant to the Plan, not specifically waived, or not specifically settled pursuant to an agreement referred to and incorporated therein or an agreed order of this Court, are preserved and retained for enforcement by the post-confirmation Debtor, and/or the Liquidating Trustee, as their interests may appear, subsequent to the entry of this Agreed Order and the Effective Date of the Plan, including, but not limited to, any pending civil actions or adversary proceedings initiated by the Debtor; provided, however, as set forth herein, all claims against Riceland have been released and are not preserved or retained for enforcement by the Debtor and/or the Liquidating Trustee. It is, further,

ORDERED, ADJUDGED AND DECREED, that distributions to creditors under the Plan shall be made in accordance with the Plan, as modified by this Agreed Order. It is, further,

ORDERED, ADJUDGED AND DECREED, that all individuals and entities holding claims in all classes of the Plan or otherwise who held claims secured by property of the Debtor or liens against property of the Debtor are hereby directed to cooperate with the proponent in implementing the terms of the Plan and, in connection therewith, to sign such documents as the Debtor-in-Possession may reasonably require in implementing the terms of the Plan. It is, further,

ORDERED, ADJUDGED AND DECREED, that any objection to the allowability of a claim and/or for any rejection damages shall be filed within forty-five (45) days of the date of this Agreed Order, or shall be forever barred. . . .

It is not clear, from the various filings, how much money is still owed to unsecured creditors, or how much money is left to pay any of them. A handful of small claims (each $2,500 or less) will be paid at 15 cents on the dollar. The rest of the unsecured claims will get less or nothing.

The best estimate for the amount of money owed to unsecured creditors appears to be around $5 million, not including farmers who settled or disclaimed in the 557 Grain Settlement.

To read all our coverage of the Express Grain bankruptcy case, see here: Index of Express Grain articles

John Pittman Hey
The Taxpayers Channel

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