Produce suppliers waiting for a total of more than $16 million from Adams Produce LLC should have a better idea of how likely they are to be paid after a May 31 hearing in the Birmingham, Ala., company’s $20 million bankruptcy case.
Judge Tamara Mitchell — who said the case is of “national interest,” with up to 1,400 total creditors — set the hearing after voicing numerous concerns about a settlement proposal offered by Adams, its bank and Pro*Act, Monterey, Calif. Pro*Act has a $5 million claim in the case under the Perishable Agricultural Commodities Act.
Attorney Larry Meuers, representing Pro*Act and 17 other PACA creditors, said May 18 he drafted the proposed settlement and thought it would provide 80% to 100% payment for PACA trust creditors. But, he didn’t argue it’s benefits in open court during a May 21 hearing.
At the beginning of the hearing, Judge Mitchell listed concerns about the proposal. She said it was premature because Adams had still not filed financial statements required in Chapter 11 bankruptcies.
Mitchell also said the settlement inappropriately asked creditors and all other parties to blindly waive their future rights in the case.
“We understand your concerns … (Adams) is not interested in moving forward with the (proposal),” said Adams’ lawyer Christopher Carson, after a brief courtroom consultation with Meuers and others. He said the parties would consider mediation and asked the judge to put the settlement proposal on hold.
Creditor attorneys claim victory
Lawyers representing some of the PACA creditors viewed the day as a victory. They had objected to the settlement on many of the same points cited by the judge.
Jason Klinowski, representing Grover Bailey Tomato House Inc., Pensacola, Fla., and Lee’s Produce, Thomasville, Ga., and Steve Leara, representing Alex Kontos Fruit Co. Inc., Birmingham, specifically objected to the waivers in the settlement.
They contend PNC Bank and other financial entities have illegally taken possession of PACA trust assets.
Judge’s concerns
Mitchell said she understood Adams and the Pro*Act group included waivers to entice PNC Bank to approve the settlement deal. However, she said she could not allow creditors to sign away rights without knowing the financial situation of Adams and PNC Bank.
The judge said the deal would have gotten other creditors off the books, clearing the way for PNC Bank to receive payment on a $5 million lien it claims to have against Adams. She said it is not known if that is a legitimate claim. If it is not, Mitchell said “that will be a game changer.”
“We’re three weeks and three days into the case. There are no schedules, no statement of affairs, not even a full (creditors’) matrix at this point. We know very little about this company in terms of financial information,” Mitchell said.
Adams Produce filed for bankruptcy April 27.
The number of PACA creditors is unknown because companies are still filing claims. As of May 21, PACA trust claims totaled more than $12 million. Court records show another $4.4 million owed to non-PACA trust suppliers.
Produce companies with PACA claims can still file.
Comments (0) Leave a comment