view current print edition




SK Foods and Salyer American cases in separate courts

by Tim Linden | May 13, 2009
Some clarity has emerged with regard to the financial difficulties being experienced by several agricultural firms owned principally by Scott Salyer in the past week as a number of public documents have been filed in separate court cases.

Rumors have persisted for the past three weeks with regard to Salyer American Fresh Foods, SK Foods LP and RHM Industries. Salyer American is now under the control of a California state court-appointed receiver, while SK Foods and RHM Industries are going through separate federal court bankruptcy proceedings that have not been combined but are proceeding in tandem as many of the creditors and debtors overlap.

Salyer American is the fresh entity and is well known in the produce industry as a shipper of many fresh vegetable commodities with Salinas, CA, serving as its home base. SK Foods and RHM Industries are two processing facilities with basically the same ownership but organized as individual corporations.

Attorney Effie Anastassio of Anastassio & Associates in Salinas, CA, said that in all likelihood, the court proceedings would remain separate even though the firms are both owned by Scott Salyer. She said that corporate entities such as this have typically followed the correct financial guidelines to remain separate. Hence creditors of one entity will not be able to go after the assets of one of the other sister operations.

Regarding Salyer American, Steve Franson has been appointed by the court with the approval of SAFF and its major secured lenders, who requested the court action. Mr. Franson is currently sorting through the books and the firm's contracts to accurately assess the company's financial position. Attorney Patricia Rynn of Rynn & Janowsky in Newport Beach, CA, said that there are numerous PACA Trust creditors of SAFF who will trump the banks once the receiver finishes analyzing the financials and begins to pay the debts.

Still another person close to the situation, who represents SAFF grower creditors and asked not be identified, revealed that former Salyer American President Eric Schwartz is working with Mr. Franson to sort out the many contracts SAFF has. Mr. Schwartz resigned his position at SAFF within the last two weeks but was apparently hired by the receiver on a consulting basis to help him work through the process. Industry observers applauded the effort, as Mr. Schwartz has been working closely with those contracts for many months and is the person most familiar with them.

In negotiations with growers, SAFF has indicated that it hopes to emerge through the receivership process as a company that can secure financing and can be an ongoing concern. However, the company did inform its growers in late April to stop planting the crops that SAFF has already contracted. Crops already in the ground will be harvested in the next two months, but those close to current negotiations said that SAFF is currently using potential future revenues from those crops to help satisfy past debts.

For example, the shipper has some contracts in which it owns part of the crop in the ground. During these current negotiations, SAFF has told at least one grower that it can market the crop elsewhere and use SAFF's share of those future profits to pay off past debts it is owed.

SK Foods and RHM Industries were the subject of an involuntary bankruptcy petition filed in federal court by three creditor banks on May 5. Two days later, the two firms filed for voluntary Chapter 11 bankruptcy protection and among their "First Day Motions" was the request that the involuntary proceedings be vacated. Both Ms. Rynn and Ms. Anastassio indicated that the petition would likely be granted.

The two processing plants, which mostly process tomatoes and chili peppers, are for sale, and the bankruptcy plan is to sell these plants as ongoing operations under the Chapter 11 proceedings. Other California processors have expressed interest in purchasing the operations, but no firm offer has been made public at this point.

These two bankruptcies are subject to PACA Trust proceedings, as numerous growers are owed money for their crops that were processed at the facilities and should be first in line when assets are distributed.