by JIM ALGIE
Two associated meat packing firms that ceased operations in early April owing millions of dollars to Ontario hog farmers “do not appear to have a viable business with a going concern value,” the trustee overseeing restructuring plans for Quality Meat Packers Limited has concluded.
The opinion appears in a May 2 report by trustee A. Farber and Associates and posted Monday to that firm’s corporate website. The Farber firm was appointed to oversee development of a business proposal after Quality and a related firm, Toronto Abattoirs, filed notice April 3 in Superior Court of Justice –Ontario under terms of the Bankruptcy and Insolvency Act. As a result, the companies received court protection for a 30-day period to pursue restructuring.
Court protection expired Monday, however, and company president David Schwartz has applied to broaden Farber’s appointment to take control of all assets. A judge will consider the application at a hearing scheduled for 10 a.m. Tuesday in Toronto.
In an affidavit sworn May 2, Schwartz said the company was “unable to secure sufficient supply to recommence operations at an economically viable level.” Earlier court filings indicated the company planned to resume business processing hogs through pre-payment arrangements negotiated with the Ontario Pork Producers Marketing Board. A pre-payment agreement was negotiated and filed with the court but it appears no hogs were delivered under its terms.
In the absence of a further extension of court protection or a restructuring proposal, the companies involved “will be deemed to have filed assignments in bankruptcy, effective May 6,” the May 2 trustees’ report says.
During the past 30 days, Quality sold inventory and collected receivable accounts, putting the company in a positive cash position, the trustees report says. As a result, the companies’ main banker, Toronto Dominion, “repaid itself in full using cash balances in Quality accounts at TD,” the trustees report says.
TD is one of two, major secured creditors. Early April, Bankruptcy Act filings estimated company debt to TD at $8.082 million.
The second, secured creditor is a separate holding company which also involves Quality Meats President David Schwartz. The holding company claims a security agreement on debts of more than $19.3 million.
An April 9 trustees report estimates outstanding debt to hog producers at about $8.671 million.
In a decision dated April 11, Ontario Superior Court Justice D. M. Brown rejected a bid from a group of hog farmers that would have forced Quality out of court protection and establish priority security for them.
The farm group’s application sought security available for agricultural product suppliers under S. 81.2 (1) of the Bankruptcy and Insolvency Act. The act provides such security where a purchaser has become bankrupt or where a receiver has been appointed. Judge Brown ruled the agricultural security did not apply at the time of Quality’s early April notice. The security claim is limited to products delivered within 15 days before either the bankruptcy or the appointment of a receiver.
Tuesday’s hearing is to consider the appointment of Farber as receiver and manager of “all assets, undertakings and property of the debtor,” Schwartz’s May 2 affidavit says.
“Quality was unable to secure sufficient supply to recommence operations at an economically viable level in the week of April 25, 2014 as contemplated,” Schwartz said. As a result, the company “had difficulty obtaining customers commitments for its products,” the Schwartz affidavit says.
If Farber is appointed receiver, the company “intends to liquidate the remaining, current assets and seek auction/liquidation proposals for the equipment,” the trustees’ May 2 report says. BF
Comments
QMP was often considered the "good packer-buyer" but purchasing hogs for around 7 days when they knew they could not or would not be able too pay for them destroyed something like 89 yrs. of trust . Of course TD gets paid ,I hope every pork producer who ships there gets paid before there own holding or family company does. No one in the hog industry ever seen this coming. And isn't going to help build pork industry back with 1 less major buyer. kg kimball
But for how long
Well maybe now all of these know it all pork producers would like to have an SM system so that they would have a market to sell their product in .
Supply management in pork would, with no exports, and decreased consumer demand resulting from artificially-high prices, and the constant ratchet-effect declining production numbers has on "cost-of-production", have caused such a contraction in the industry that Quality would have folded years ago.
When are farmers going to learn that supply management in hogs, or supply management in anything, for that matter, is the disease, not the cure?
More to the point, when are farmers, especially the one producing the above posting, going to learn that supply management doesn't create a market as much as it prostitutes the market for the benefit, not of society, but for the benefit of a few very-greedy, and very-myopic, farmers?
Stephen Thompson, Clinton ON
Very well said and completely accurate. SM in pork would have killed an industry except for a very few and very wealthy farmers...it would also have killed any hope for a younger generation...but then the current generation (for the most part) couldn't care less.
Obviously though you are not talking for the younger generation,what any young next generation pork producer see's now in both the US and this Province is a form of Supply management,the limiting supply and increased profits for the producer.Above all, some sort of stability that a young person could take to his banker,instead of the periodic "cleansing" of the industry we have wittnessed the last few decades.
For someone getting into the Pork industry at present all they have to look forward to is the ineveitable bleak future of going back to the "norm"!
You obviously don't know what many pork producers do, that have stayed in the business and made a living for years.
You also underestimate the younger generation...all they need is a chance.
Many industries go through a "cleansing"...some just take a little longer to take their turn...but they will.
Don't think quality would have done this if they had an alternative, 89 years the same ownership is long in this environment. Look @ the live cycle of our own marketing board, the food equipment and service industry. Remember one dollar a hog can make and break you.
QMP family owners had put may millions into keeping it going the weeks before this happened so they were well aware that they could not meet there commitments . The owners-management choose too keep buying and take somebody else's hard earned dollars . And not just QMP is guilty as you see more than a few farmers that have used debt review board or bankruptcy to circumvent debts and then soon went back to borrowing big dollars and driving expensive machinery and pick ups . A slap in the face too all the hard working families who believe in trying too service there debts too the best of there abiliities.
Been told of two farmers who went through the Farm Debt Review two times each . Now that is just freaking crazy .
So what was Ceta and the Korean trade deals all about? We never had the processing facilities in this country to handle those deals in the first place especially Pork and now this! The federal and Provincial Governments just wasted millions on upgrades to these plants
It should come as no shock then why we are trying desperately to bring COOL to an end,we have been latched onto the US skirt for so long we have no idea how to fend for ourselves.
i wonder if td,s pork producing customers caught up in this will have a understanding banker
the price of hogs go up $100/ hog but the pork in stores doesn't. farmers without ped are laughing right now (though i do feel bad for the ones with it) those other big plants are struggling just as much just not saying it. Maple leaf recorded a loss of something like 125 million in the first quarter and unless you want to pay $15 for a pack of bacon something has to change
Farmers complain all the time that when farm gate prices decline, retail prices don't - and they most-often make this argument to claim that if supply management ended, retail prices won't go down. They are, of course, using what is happening in the short-term as a proxy for what will happen in the long-term, and that is, and always will be, nonsense.
Now that farm gate prices of pork have sky-rocketed, but retail prices haven't, it would be wise for farmers to observe that, in the short-term, farm gate price changes don't have much of an effect on retail, either when the price is declining, or when it is rising.
More to the point, the next time some feeble-minded supply management supporter tries to claim that retailers, not dairy and poultry farmers, are hosing consumers, I expect there to be a chorus of responses on this site pointing out that, as of now, retailers are short-term heroes for not hosing consumers by immediately passing farm gate pork price increases along to them.
Stephen Thompson, Clinton ON
What's different, lets go back to the twenties
Post new comment