Tag Archives: bankruptcy

Jason Klinowski to Serve as Special PACA Counsel to Allens Canning During its Chapter 11 Bankruptcy Case

Allens Canning

On October 28, 2013, Allens, Inc. d/b/a Allens Canning (the “Debtor”) filed for Chapter 11 bankruptcy protection.  Anticipating over $20 million in potential PACA claims, the Debtor retained Jason Klinowski of Freeborn & Peters LLP’s food industry team to serve as special PACA counsel.  In this capacity, Jason assisted the Debtor in the preparation of the PACA claims procedure order and now manages the Debtor’s obligations under the order.  To be clear, the PACA claims procedure order is a Court approved procedure by which the Debtor and all potential PACA trust beneciaries test the validity of the PACA claims.

In the Courtroom, Jason also helps the Debtors address such complex PACA trust issues as:

  • Whether the Court Should Compel the Debtor to Create and Fund a Segregated PACA Trust Account  (NO)
  • Whether the Debtor May Use PACA Trust Assets in Connection With its Efforts to Reorganize Under Chapter 11 of the Bankruptcy Code (YES)
  • The Proper Use of Pre-Transaction Written Agreements to Limit PACA Trust Liability (to be determined)
  • And more…

The Debtor’s Chapter 11 case not only involves significant amounts of potential PACA trust liability, but it also contains several complex PACA trust issues, the resolution of which could change how the produce industry does business.

Fresh & Easy Neighborhood Market, Inc. Files for Chapter 11 Bankruptcy Protection

freshandeasyneighborhoodmarketOn September 30, 2013, Fresh & Easy Neighborhood Market, Inc. filed for chapter 11 bankruptcy protection in the District of Delaware and was assigned case number 13-12569.  The Debtor’s voluntary petition estimates: (i) between 10,000 and 25,000 creditors; (ii) holding assets valued between $100 million and $500 million, and; (iii) liabilities between $500 million and $1 billion dollars.  This case was assigned to Judge Kevin J. Carey.

A review of the first day motions shows the Debtor has already filed a Motion to Pay PACA/PASA claims and are seeking permission from the Court to use $5,000,000.00 (in the aggregate) to pay all the PACA/PASA claims.  In addition, the Debtor is asking for a court order directing the Debtor’s bank to honor all checks presented for payment.  In addition to several other motions, the Debtor filed a 305 page list of creditors.

Please check back for updates.  I will update this entry further after I review the first day pleadings more fully and additional pleadings are filed.

Jason Klinowski and Freeborn’s Bankruptcy & Financial Restructuring Group Tapped to Represent the Official Committee of Unsecured Creditors in the Pro’s Ranch Markets Chapter 11 Case

Pros Ranch MarketThe Official Committee of Unsecured Creditors in the Pro’s Ranch Markets’ bankruptcy case recently retained Freeborn’s Bankruptcy and Financial Restructuring Group to help maximize their recovery in this Chapter 11 case.  Specifically, Freeborn possesses considerable experience representing official committees of unsecured creditors in chapter 11 cases involving retail grocers, food service companies, and food distribution companies.  Because the attorneys in Freeborn’s Food Industry Team routinely represent these same types of food industry clients, we are highly familiar with the issues affecting both debtors and creditors in this space.  This allows Freeborn to be incredibly effective when it comes to maximizing value for creditors.

Belle Foods Files for Chapter 11 Bankruptcy Protection

Belle Foods LogoOn July 1, 2013, Belle Foods LLC filed for Chapter 11 bankruptcy protection in the Northern District of Alabama.

Although Belle Foods presented a top 20 list of unsecured creditors, the business has not yet submitted its full schedules of debts and assets, statement of financial affairs or other required information. The business estimates it owes between $10 million and $50 million in debt and that it holds the same general range in assets.

Belle Foods told the bankruptcy court that its Chapter 11 bankruptcy petition was precipitated by a variety of factors that have led to a deterioration in its business and a lack of liquidity. The debtor cited technical issues with its accounting system during 2012 that led to losses and said it also “experienced issues with its lending structure and relationship.” Additionally, higher payroll taxes in 2013 led to a decline in purchases by the debtor’s customer base, according to documents filed with the court. Furthermore, Belle Foods said it has seen an increased amount of competition in several of its markets from other grocers. With older locations, the debtor explained it has had difficulty competing with the newer grocery stores that have moved into its markets.

Belle Foods is a privately held company that owns and operates a grocery store chain that operates stores under the banners of Belle Foods, Piggly Wiggly and Food World. Combined, Belle Foods LLC states it operates 57 stores in Florida, Georgia, Alabama and Mississippi.

It is not clear from the pleadings how much, if any, PACA debt exists.  I will provide more updates as new information becomes available.

Jason Klinowski Quoted in The Packer’s Recent Article on Pro’s Ranch Markets Bankruptcy

the-packerOn Mary 30, 2013, Tom Karst of The Packer published an article discussing the Pro’s Ranch Markets bankruptcy case and the $7.2 million dollars in anticipated PACA trust claims.  Here is a link to Tom Karst’s article: Retailer Bankruptcy Could Involve Millions in PACA Claims.  In case you did not know, “Pro’s Ranch Markets is a Hispanic-oriented grocery chain with stores in seven stores in Phoenix, one store in Las Cruces, N.M., one store in Albuquerque, N.M., and two stores in El Paso, Texas. The grocery chain employs 2,235 employees in four states, according to court documents.”  Tom’s article quoted Jason as follows:

Jason Klinowski, agricultural and food law attorney from the firm of Freeborn & Peters LLP, Chicago, said the grocery chain apparently has a limited pool of assets from which to pay its creditors.

“If the debtor’s voluntary petition accurately reflects the amount of assets in the debtor’s estate, then I think that PACA creditors will be well-advised to quickly object to the debtor’s use of the cash collateral and start looking for alternative sources of recovery.”

Pro’s Ranch Markets – Bankruptcy UPDATE

Pros Ranch MarketAs reported by SeaFax on May 30, 2013 – Pro’s Ranch Markets has not presented full lists of assets and liabilities or statements of financial affairs, but estimates that liabilities are between $10 million to $50 million. Those documents are due by June 11, unless an extension is requested and granted.

Pro’s Ranch Markets did file a motion to establish procedures and to allow claims of Perishable Agricultural Commodities Act (PACA) claimants and Packers and Stockyards Act (PASA) claimants. The motion states the debtors reviewed their records and identified at least 83 potential PACA claimants, owed about $7.2 million in pre-petition claims potentially subject to PACA.

In addition to the PACA claimants, the debtors have certain vendors who may assert claims pursuant to PASA as a result of providing them with beef, swine and poultry products. The debtors do not think they are subject to PASA.

The motion requests that the bankruptcy court enter an order establishing procedures, allowing claims and authorizing the debtors to pay, in their sole discretion, the pre-petition claims of PACA claimants and PASA claimants.  The obvious danger here is that PACA requires each unpaid supplier to share in the distribution of the PACA trust and an order authorizing the debtor to pay claims on a first come first serve basis could prejudice some PACA creditors.

PRM Family Holding Company LLC is the sole member of the other limited liability company debtors. Prodigio Mercado LLC operates three grocery stores located in Phoenix, AZ. Provenzano’s LLC operates four grocery stores located in Phoenix. Pro’s ABQ Ranch Markets LLC operates two grocery stores located in New Mexico, one in Albuquerque and one in Las Cruces. Pro’s ELP Ranch Markets LLC operates two stores located in El Paso, TX. Pro’s ELP Ranch Markets Beverage Company LLC holds the liquor license for Pro’s ELP Ranch Markets LLC. Pro & Son’s LLC holds title to intellectual property owned by the debtors. Pro’s Ranch Markets (CA) LLC acts as the paymaster, manager, internal wholesaler, oversees trucking and distribution, pays all accounts payable and provides employees to all of the debtors’ stores. Collectively the debtors own and operate 11 retail grocery stores and employ approximately 2,235 full time workers in the stores and other locations.

Pro’s Ranch Markets Bankruptcy

Pros Ranch MarketOn May 28, 2013, Pro’s Ranch Markets filed for Chapter 11 bankruptcy protection in the District of Arizona.  Although the company has yet to file its schedules, the Debtor anticipates $7,229,772.85 in pre-petition PACA claims from 83 companies.

To be clear, the Pro’s Ranch Markets bankruptcy involves each of the following entities:

  • PRM Family Holding Company LLC
  • Prodigio Mercado LLC
  • Pro’s ABQ Ranch Markets LLC
  • Pro’s ELP Ranch Markets LLC
  • Pro’s ELP Ranch Markets Beverage Company LLC
  • Pro & Son’s LLC
  • Pro’s Ranch Markets (CA) LLC
  • Provenzano’s LLC

Please check your A/R to see if this case affects you.  If it does, please do not wait to assert your rights.

UPDATE: East Coast Brokers & Packers Bankruptcy

Bankruptcy SignOn March 14, 2013, SeaFax reported that:

East Coast Brokers & Packers Inc and six of its affiliates, Circle M Ranch Inc, Ruskin Vegetable Corporation, Oakwood Place Inc, Byrd Foods of Virginia Inc, Eastern Shore Properties Inc and Stellaro Bay Inc, and the companies’ principals, Batista and Evelyn Madonia, all filed petitions for Chapter 11 bankruptcy between March 6 and March 11 with the U.S. Bankruptcy Court for the Middle District of Florida.

The debtors filed motions March 12 seeking to have the bankruptcy cases jointly administered under East Coast Brokers & Packers Inc, Case #13-02894.

The debtors have not yet presented their schedules, but estimate they hold assets totaling from $50 million to $100 million and owe between 200 and 999 creditors liabilities ranging from $50 million to $100 million.

Although East Coast Brokers & Packers Inc, Circle M Ranch Inc, Ruskin Vegetable Corporation, Oakwood Place Inc and the Madonias each submitted their top 20 list of unsecured creditors, only one of the debtors names food vendors on the documents and claims total $15,500 or less.

According to court documents, East Coast Brokers & Packers Inc distributes tomatoes and other agricultural products farmed by Circle M Ranch Inc. Additionally, East Coast Brokers & Packers Inc is also responsible for managing the packing and sales operations of the Madonias’ businesses.

The debtors informed the bankruptcy court that Ruskin Vegetable Corporation and Byrd Foods of Virginia Inc own packing houses. In addition, court documents state Eastern Shore Properties Inc owns property used to house farm workers, Stellaro Bay Inc owns property in Virginia and Oakwood Place Inc owns property which previously operated as a hotel known as Red Rose Inn & Suites, but the hotel operations have ceased.

Court documents state the Madonias own more than 20% of the issued and outstanding common stock or membership interests in East Coast Brokers & Packers Inc,  Circle M Ranch Inc, Ruskin Vegetable Corporation, Oakwood Place Inc,  Byrd Foods of Virginia Inc, Eastern Shore Properties Inc and Stellaro Bay Inc.

The debtors said in their motions seeking joint administration that their operations are closely intertwined, other than Oakwood Place Inc.

According to the joint administration motion, each of the debtors is indirectly obligated on significant debts, with MetLife Agriculture Investments owed around $46 million by the Madonias, East Coast Brokers & Packers Inc and Circle M Ranch Inc, while Stellaro Bay Inc guaranteed that debt.

The debtors conveyed to the bankruptcy court that their farming operations have been reduced in scope due to their lack of funds to support farming operations, leading to the Chapter 11 filings.

On March 11, 2013, the Bankruptcy Court issued an order setting the initial status conference to be held on March 28, 2013.  At this conference, the court will: (l) fixing a date by which the Debtor−in−Possession (DIP/Trustee) must assume or reject executory contracts or unexpired leases; (2) to set a date by which the DIP or Trustee, if one has been appointed, is to file a disclosure statement and the plan; (3) to set a date to solicit acceptance of the plan; (4) to set a date for which a party of interest, other than the Debtor, may file a plan; (5) to set a date by which a proponent of a plan, other than the Debtor, shall solicit acceptance of the plan; (6) to set the scope and format of the notice concerning a hearing on the approval of the disclosure statement; (7) and to consider whether or not the approval of the disclosure statement should be combined with the hearing on confirmation of the plan.

East Coast Brokers & Packers Files for Bankruptcy Protection

East Coast BrokersOn March 6, 2013, East Coast Brokers & Packers, Inc. (“East Coast Brokers”) filed a Ch. 11 bankruptcy in the Middle District of Florida.  Along with East Coast Brokers, Circle M Ranch, Inc., Ruskin Vegetable Corporation, Oakwood Place, Inc., and both Batista J. Madonia, Sr. and Evelyn M. Madonia all filed for bankruptcy protection.  The Debtors are currently seeking the Court’s permission to administer all of the separately filed bankruptcy cases jointly.

Although the Debtors have not (as of the time of this entry) filed their schedules or list of top 20 creditors, court documents show that all of the debtors are “closely intertwined” and that the Madonias own at least 20% of the shares for each of the entities listed above.  The Debtors did acknowledge that they owe “significant debts” and cited MetLife Agricultural Investments as an example of a creditor to whom they owe about $46 Million.  The Debtors’ court documents also acknowledged owing money to Anthony Marano Company, Crop Production, and Triangle Chemical.

For those of you familiar with East Coast Brokers and the Madonias, you may remember that various news sources reported that East Coast “quit tomatoes” back in December of 2012 and that they owed “more than $15 million in judgments and liens to state and federal governments and crop production services.”  At that time, Anthony Marano Company was reported to hold a $5.6 million dollar lien against East Coast Brokers.”  See East Coast Brokers Quit Tomatoes

Counsel for East Coast Brokers should be filing various first day motions and the balance of its schedules in the very near future.  These filings will contain additional information.  Right now, we know that claims are due on May 20, 2013.

Objecting to a Debtor’s Use of Cash Collateral in Bankruptcy

Personal BankruptcyWhen a produce company files a chapter 11 bankruptcy case, one of the first questions my PACA trust creditor clients ask is whether the debtor will be able to keep any cash it may have in the bank or any cash it receives from collecting its accounts receivable.

The answer is that the debtor almost always has a bank or other secured creditor which holds a lien on substantially all of its assets.  Property like inventory, machinery and equipment and the like is called hard collateral.  Such items can be used and sold in the ordinary course of business in a chapter 11 case.

Liquid assets, like cash, bank accounts, and accounts receivable, however, are a different matter.  These are called “cash collateral.”  And cash collateral may not be used over the objection of a secured party without a court order.  This order is called the “cash collateral order.”   Simply put, the purpose of a cash collateral order is to allow the debtor to utilize its cash collateral even though the cash collateral is subject to the liens of a secured party.  To do this, the debtor must provide its secured lenders with adequate protection (e.g. replacement liens in post-petition assets, super-priority administrative claims, etc.) necessary to facilitate the use of the cash collateral.  Because the debtor’s ability to use its cash collateral is critical to its ability to successfully emerge from a chapter 11 filing, debtor’s counsel often seek court approval of a cash collateral order on the very first day of the bankruptcy filing.

If you are a PACA trust creditor, you must be mindful of the cash collateral order process because there are almost never any provisions included in a cash collateral order that protect the rights of the PACA trust creditors.  As a result, a savvy PACA trust creditor will immediately object to the debtor’s use of cash collateral and create a seat at the negotiating table for the PACA trust creditors.  A well advised PACA trust creditor understands the debtor’s obligations under PACA and will generally make the following objections to debtor’s use of cash collateral:

  1. The scope of the PACA trust covers the debtor’s cash collateral as a matter of law
  2. PACA trust assets are not property of the debtor’s estate
  3. The debtor cannot use non-estate property as cash collateral
  4. The debtor cannot use PACA trust assets as collateral for post-petition financing

A timely filed objection to a debtor’s attempt to obtain a cash collateral order will often result in the full and immediate payment of the PACA trust claim.  When that is not possible, the objecting PACA trust creditor will have the ability to either seek adequate protection (just like a secured party) from both the debtor and its secured creditors or force the case to convert to a chapter 7 liquidation case.  Remember, a chapter 11 case will not stand if there are no estate assets to administer.

Key Point: If the PACA trust creditors do not act quickly when they are notified of a produce buyer’s insolvency, the debtor will obtain a cash collateral order that does not include any protections for PACA trust creditors.  If that happens, the cash collateral order will allow the debtor to use trust assets (the Court won’t know unless someone speaks up) to administer its estate, obtain DIP financing, and otherwise place trust assets out of the PACA trust creditors reach (e.g. paying pre-petition wages, etc.)