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Archive for Thursday, September 26, 2002

Co-op still taking bids for Lawrence plant

September 26, 2002

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Kansas City, Mo.-based Farmland Industries has been given another 60 days to come up with a plan to emerge from bankruptcy.

U.S. Bankruptcy Judge Jerry W. Venters set Nov. 27 as the new deadline for the agribusiness giant to file its reorganization plan.

Farmland filed May 31 for Chapter 11 bankruptcy protection. Earlier this month, it put up for sale its seven nitrogen fertilizer plants, including one in Lawrence, to raise funds to pay down its debt. The Lawrence plant had been closed since May 2001, when it released most of its 150 employees.

Farmland spokeswoman Sherlyn Manson said Wednesday the company hadn't set a date to sell any of the plants.

"We are contacting people who we think might be interested in purchasing all of the facilities," she said.

The cooperative hopes to receive an offer from an interested buyer, Manson said, then set an auction date that would allow other companies to bid. No date has been set, but Manson said the company would like to have an auction before the Nov. 27 deadline.

If a deal isn't close by late November, the company may seek another extension.

The bankruptcy court also dealt a blow to Lawrence-area farmers who had hoped to redeem their equity, or shares, in the bankrupt cooperative. Lawrence-based Farmers Cooperative Assn., which also is bankrupt, has about $4.9 million worth of equity in Farmland.

Officials with the Lawrence association hoped to redeem that equity to make payments to area farmers who owned a portion of the cooperative.

At a Tuesday hearing, Farmers Cooperative officials, along with members of other co-ops in the region, asked the court to form an equity holders committee that would be involved in Farmland's reorganization process. Venters denied the motion, in part because he said the chances were "rather remote" equity holders ever would be able to redeem a significant portion of shares.

As a result, Mel Squyres, chief financial officer for the Lawrence co-op, said the association would begin removing from its books the nearly $5 million it is owed by Farmland.

Squyres said the only way Farmers Cooperative would be in a position to fully pay the $11 million worth of equity its 2,600 members are owed was if the association won a lawsuit it had filed against its chief lender, CoBank.

The co-op filed suit earlier this month against CoBank, claiming the Denver-based bank unnecessarily forced the association to cease operations and file for bankruptcy in September 2000. The suit probably will seek damages in excess of $12 million.

Venters, however, did direct the bankruptcy trustee in the Farmland case to appoint three equity holders to another committee that is working on the company's reorganization plan. One of those equity members will be Squyres.

Squyres said he would serve on the board, and that he expected Farmland's bankruptcy process to last much longer than the Nov. 27 deadline the court has imposed.

"It took FCA almost 18 months to come up with a plan, and I've got to think Farmland's situation is at least 60 times more complicated than ours was," Squyres said.

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