Quality Meat owner seeks court permission to liquidate
Sunday, May 4, 2014
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