Receiver flushes out Quality Meat Packers assets

Friday, July 25, 2014

by SUSAN MANN and BETTER FARMING STAFF


When it comes to flushing out assets in the Quality Meat Packers Limited and Toronto Abattoirs Limited bankruptcies, court-appointed receiver A. Farber & Partners Inc. is leaving no stone unturned. But to date only secured creditors have received payments for the money they are owed.

And pig farmer Jim Bloxsidge of Burgessville doesn’t think he’ll get a dime of the more than $600,000 he is owned for transportation and for shipping hogs to Quality Meat Packers at the end of March/beginning of April. “My opinion is we’re not going to see any money. Quality has themselves covered to the hilt. The people that are first in line are covered, but we’ll never see it.”

So far, receiver A. Farber & Partners has recovered a net of $9.8 million for the Quality Meat Packers estate, according to its second report approved by the court on July 15. Quality Meat Packers and Toronto Abattoirs were deemed bankrupt May 6. To date, a net of $99,532 was recovered for the Toronto Abattoirs estate but the receiver didn’t recommend making an interim distribution from that estate for now.

Before filing the Notice of Intention to make a proposal under the Bankruptcy and Insolvency Act, Quality Meat Packers and Toronto Abattoirs received about 24,000 live hogs a week, usually from Monday to Thursday. Toronto Abattoirs was a separate legal entity that provided the slaughter services to Quality Meat Packers, which bought the hogs from farmers, and then transferred the products back to Quality, the report says. Quality Meat Packers had 500 employees, while Toronto Abattoirs had 250 workers.

In addition to approving the receiver’s report on July 15, the court also approved paying the lawyer’s fee for TD Asset Finance of $7,893.82 and making a $7.5 million payment to secured creditor Quality Meat Packers Holdings Limited, which is owed about $20.8 million. TD, the other secured creditor, was owed about $8 million but it was paid in full when the two companies each filed a Notice of Intention under the Bankruptcy and Insolvency Act on April 3 and to name A. Farber as the trustee. On May 6, A. Farber was appointed receiver by the court. The money to repay TD came from amounts in the companies’ deposit accounts with TD, A. Farber’s report says.

About the payments made to TD and Quality Meat Packers Holdings Limited, Bloxsidge says “I don’t like it.” Bloxsidge is one of the unsecured hog farmer creditors collectively owed about $8.7 million by Quality Meat Packers.

On July 15, the court also approved payments to A. Farber & Partners of $200,172.55 for work it did from May 5 to June 13 and $55,161.60 to Farber’s lawyer for work it did from May 5 to June 26.

There is more than $2.3 million left in the estate after those payments were made but $7,409 is earmarked for the Canada Revenue Agency while $518,750 is for a deposit made by Hilco Asset Sales Canada Corporation, which will auction off the companies’ equipment in early September. The deposit will be released once the auction is done. Money is also being retained for ongoing receivership costs, the report says.

In some cases, the receiver has come up empty handed in its hunt for assets. For example, company documents show there was $13,775 in State of Israel bonds but management told the receiver the bonds were lost years ago and Toronto Abattoirs “was not able to realize on this asset,” the report says.

Similarly, Great Lakes Specialty Meats of Canada Inc. located in Mitchell, a sister company to Quality Meat Packers and a company that is also bankrupt, owes Quality Meat Packers $12.9 million but currently “it is not expected that there will be any funds available to Great Lakes’ unsecured creditors, which would include QMP (Quality Meat Packers).” The receiver plans to continue monitoring the Great Lakes bankruptcy.

PricewaterhouseCoopers was appointed receiver in the Great Lakes Specialty Meats bankruptcy June 10 after Farm Credit Canada, a major secured creditor for that company, applied to have the appointment made.

Quality Meat Packers owed Toronto Abattoirs slightly more than $1 million but Farber says in its report it wasn’t expecting to recover inter-company receivables from the bankruptcy.

In other instances, the receiver was able to recover money from assets. For example, the trade receivables were estimated to produce $2.3 million. So far the receiver has collected $2.1 million from the receivables and is continuing to work on collecting the outstanding $500,000.

Similarly, Quality’s inventory with a book value of $911,260 was made up of frozen pork stored off site at frozen goods warehouses. The receiver continues to sell the inventory through “normal sales channels and on normal terms,” the report says. The receiver has obtained $946,410 from inventory sales so far and will likely get an additional $100,000 from the sales.

There have also been a number of thorny problems the receiver has had to solve. For example, most of the inventory was stored at International Cold Storage of Brampton, which said it was owed more than $300,000 for unpaid storage and refused to ship any inventory until the account was settled in full. After reviewing the claim, the receiver determined only $40,000 related to inventory still on hand. After an exchange of letters between the receiver and its lawyer, the storage firm and its lawyer, the storage firm agreed to accept $40,000 plus HST “to release the lien on the goods still on hand,” the report says.

Ontario Pork officials couldn’t be reached for comment. BF