Asian firm gets bargain in SK Foods sale
by Tim Linden | July 06, 2009
Experts called the bankruptcy sale of two SK Foods processing plants a tremendous bargain June 26 when the U.S. Bankruptcy Court in Sacramento, CA, approved an Asian company's offer of $39 million.
The sale is a great relief to scores of processing tomato growers, who planted thousands of acres of tomatoes on contract with SK Foods before the bankruptcy filing took place in late spring. The new owner, Olam International in Singapore and its subsidiary Olam Tomato Processors Inc., will honor the vast majority of the contracts. However, it was not clear how many other contracts will be honored by the new owner.
Patricia Rynn of Rynn & Janowsky, a law firm that represents a number of pepper and onion growers who had contracts with SK Foods, said that the preliminary indication is that not all of those contracts will be honored. She said that many of her clients are currently looking elsewhere to process their contracted acreage.
Ms. Rynn, however, said that it appeared as if the $39 million in revenues from the sale of the two processing plants will cover the PACA Trust debts that were incurred by SK Foods. Other creditors will not be so lucky. SK Foods is said to have a $200 million debt load. The $39 million bankruptcy sale of the firm's chief assets means that creditors, mostly the firm's banks, will be faced with a large write-off.
Meanwhile, officials of Salinas, CA-based Salyer American Fresh Foods, which is a sister company of SK Foods and which is also controlled by Scott Salyer, are moving toward a July 10 court date when a number of issues will be on the table. Those officials are trying to have the court remove the receiver, who was put in place in late May at the behest of Salyer American's bank creditors, who were owed approximately $34 million. Within two weeks, the court-appointed receiver had effectively shut down the firm because he was not able to secure additional financing. Salyer American officials were opposed to that decision and went to court to remove the receiver.
The receiver is currently working with creditors and the firm's list of accounts receivables, trying to collect and amass funds to pay down the debts, including the PACA Trust creditors. There have been some indications that the PACA Trust creditors will be paid in full.
The sale of SK Foods' processing facilities came just in time to allow the maturing tomato crop to be harvested. Harvest typically begins in early July and continues throughout the summer and into October. Lisa Crist, executive vice president for SK Foods LP, was quoted in the Monterey Herald as saying that the company's 1,500 seasonal and full-time employees are expected to transition to the new company. "All of the employees, growers, contractors and communities are very relieved to have Olam as the new owner," she said. "We are not anticipating layoffs."