Northern Beef Packers seeking quick sale
August 9, 2013
by Bryan Salvage
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SIOUX FALLS, SD — Because Northern Beef Packers has no cash, a quick sale is needed to preserve the value of its state-of-the-art beef packing facility, according to Oak Global Advisors -- an investment company that loaned the troubled South Dakota beef plant $35 million last September. The company agrees, according to The Associated Press.
The Aberdeen-based company, which filed for Chapter 11 bankruptcy protection in July, asked the court in Sioux Falls on Aug. 8 to allow it to hire investment banking firm Lincoln International, which is now recommending a sale. Lincoln’s Chris Stradling, a mergers and acquisitions adviser, testified yesterday that his company would seek out a "stalking horse" bid, in which one potential buyer makes an initial offer to set the floor for an auction that invites competitive bids. The most likely outcome is that someone else will own this business in a control position," Stradling said.
In July, the Aberdeen plant filed for protection under Chapter 11. The bankruptcy court in Sioux Falls was expected to look at the company's plan to obtain credit to move forward with a sale or restructuring during a hearing scheduled for yesterday morning.
In a memo filed Aug. 7, Roger Damgaard, White Oak Global Advisors attorney, said the plant needs money to pay security guards and a skeleton staff of essential employees and assist with the bankruptcy case. "The Debtor is not operating and has no cash," Damgaard wrote. "The Debtor's primary asset, the Aberdeen beef-processing facility, currently sits idle and is in dire need of funding to pay critical post-petition expenses necessary to preserve value."
Northern Beef Packers, which was once locally owned, is now 41-percent owned by businessman Oshik Song along with 69 other South Korean investors who each forked over at least $500,000 under the federal EB-5 program that encourages foreign investment in exchange for qualifications to secure permanent residency, AP reported.
Although land for the $109 million plant was first secured In 2006, the company was not able to slaughter its first animal until late last year. Since then, it has struggled to appropriate the operating funds to operate at full capacity. Based on court documents, the plant is now facing $138.8 million in liabilities and has just $79.3 million in assets. It recently has laid off most of its employees and is trying to determine how it can restructure to resume production or sell.
Northern Beef eventually started to increase production early in 2013, but only to about 200 head per day — which is far short of the 1,500 capacity — after securing additional financing. Approximately four years ago, Dennis Hellwig, an Aberdeen livestock businessman who was once Northern Beef's largest investor, sold his interest. Nevertheless, he said a plant processing 1,500 head per day is still needed in the region to serve cattle ranchers in the Dakotas, Nebraska, Iowa and Minnesota.