EuroFresh keeps going with offer to buy on table

01/30/2013 11:19:00 AM
Coral Beach

For additional information please see "EuroFresh wants to pay PACA claims, continue operations" and "UPDATED: NatureSweet plans to buy EuroFresh Farms assets"

EuroFresh Farms(UPDATED COVERAGE, Jan. 31) Greenhouse tomato marketer NatureSweet’s plan to buy competitor EuroFresh — announced on Jan. 28, one day after EuroFresh filed for Chapter 11 bankruptcy protection — will be eased by a judge’s decision to allow the beleagured company to continue operating.

Judge Eileen Hollowell cleared the way for the Willcox, Ariz., greenhouse company to continue operating pending the sale to San Antonio-based NatureSweet in a series of orders filed Jan. 29.

The sale price listed in court documents is $51.1 million. A hearing on the bidding portion of the sale process is set for Feb. 22. Attorneys representing EuroFresh did not respond to calls for comment.

NatureSweetThe sale includes 318 acres of EuroFresh tomato/cucumber greenhouses, and the company’s other real and intellectual property.

“The purchase agreement provides that the purchaser will offer to employ all employees, provided that the purchaser will not be obligated to retain employees after the closing date,” a EuroFresh motion states.

Good PACA news

Produce suppliers who billed Eurofresh under the Perishable Agriculture Commodities Act before the bankruptcy filing have a good chance of being paid. EuroFresh asked for and received the judge’s approval to pay those claims, which it estimates at $600,000.

Hollowell also approved EuroFresh requests to continue paying employees’ wages and benefits as well as shipping, warehouse and other logistics expenses.

In addition, she prohibited utility companies from cutting off service pending a Feb. 15 hearing. The grower-shipper owes Southwest Gas Co., Tucson, Ariz., $1.5 million, according to a list of creditors.

Debts and assets

Total claims against EuroFresh, according to court documents, are $69.5 million. Of those, $450,000 are employee wages and benefits incurred before the bankruptcy filing. Unsecured, nonpriority claims total $10.7 million. Secured claims total $58.3 million.

The company reported assets of $10.7 million, which all fell into the “personal property” category.
The EuroFresh assets sheet states that the company’s current interest in its real property is unknown and lists the real property value of $51.1 million as a secured claim.

Accounts receivable prior to the bankruptcy filing totaled $9.3 million. Retailers on the accounts receivables list include Costco, Kroger, Safeway, Sam’s Club, Supervalu and Wal-Mart.

Criminal case payments

In August 2011 the U.S. filed criminal charges against EuroFresh, charging the company with employing illegal immigrants from July 2000 through February 2007.

EuroFresh pleaded guilty to the charges, and a plea agreement put the company on five year’s probation and imposed a $600,000 fee (over five years).

The court judgment stated the amount was equal to the proceeds EuroFresh gained by employing the illegal immigrants.

Diagram of a downfall

Motions from EuroFresh detail the company’s financial troubles, which date back to at least 2009 when it filed for Chapter 11 bankruptcy debt reorganization.

That reorganization was necessary because of a “highly leveraged balance sheet,” high interest costs, reduced production volumes because of a plant disease, and high energy prices in 2005, 2006 and 2008, according to the motion.

“The debtor emerged from Chapter 11 in November 2009 with a lower level of debt and new ownership comprised of its pre-petition bondholders and Johan van den Berg who invested new capital,” according to the motion.

EuroFresh officials state in the motion that the company has been in default since late 2010. In 2012 they began looking for a buyer.

In the summer of 2012 EuroFresh representatives contacted 54 potential bidders. They negotiated confidentiality agreements with 31 of them.

EuroFresh narrowed the field to eight and had “detailed calls and meetings,” which resulted in four entities submitting bids. Ultimately those four bidders declined to continue the process, according to EuroFresh court filings.



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