Elevator bankruptcy hits farmers’ pocketbooks
When Pipeline Foods LLC filed bankruptcy in July, several area farmers found themselves entangled in a legal quagmire. Together, they face losing more than $1.35 million.
Each had delivered contracted grain – and lots of it - to the Pipeline elevator in Hope in the months before the company filed for Chapter 11 protection from a bankruptcy court in Delaware. That landed them on the Top 20 list of creditors with the largest unsecured claims
According to court documents, Pipeline Holdings LLC lists creditors who have claims secured by property at nearly $64 million; the total amount of nonpriority unsecured claims is nearly $11 million. That puts the company’s total liabilities at $74.73 million.
Its total assets – taking into account real property, equipment, cash, inventory and investments – are recorded as zero.
Initially, the bankruptcy judge agreed to allow the company to operate within a cash collateral budget and sell its grain inventories to pay employee wages and benefits and pay off secured creditors.
The Minnesota Department of Agriculture, the state’s primary regulator of grain storage facilities, objected and asked the court to require the firm to place income in a secure account to be overseen by the court.
On Friday, the bankruptcy court did just that – affording unsecured creditors an opportunity to recover some of their funds.
“If farmers get a penny out of this, I will be shocked,” said Kevin Motl, a farmer from Blooming Prairie. Court documents show that Pipeline Foods owes Motl a little more than $250,000. Motl said the figure is closer to $350,000.
“They have no idea how bad this is going to hurt us,” Motl said.
Other area farmers standing to lose thousands and on the Top 20 list are Brant Hemingway of rural Ellendale, $356,220; New Richland Grain LLC, $414,695; and Herbst Farms in Kasson, $338,597.
Omnibus hearings have been scheduled for Sept. 22 and Oct. 26.
Typically, Chapter 11 debtors receive a moratorium on the payment of most of their general unsecured debts for the time between their bankruptcy filing and the implementation of a confirmed plan. In most cases, that’s anywhere from six months to a year.