Kansas City, Mo Bankrupt Farmland Industries Inc., once the nation's largest farmer-owned cooperative, plans to sell off its remaining assets and use the proceeds to pay its debts.
Kansas City, Mo.-based Farmland, which filed for Chapter 11 Bankruptcy protection in May 2002, filed an amended reorganization plan late Thursday in which it said it would pay its creditors by liquidating assets. The plan is subject to the approval of the court and Farmland's creditors.
Under the plan, Farmland estimates its secured lenders and the unsecured creditors to its pork unit, Farmland Foods, will receive all the money they are owed. Farmland Industries' unsecured creditors and bondholders are expected to receive between 50 percent and 65 percent of what they are owed.
Farmland spokeswoman Sherlyn Manson said the company owes less than $20 million to banks but still owes about $1 billion to unsecured creditors. Since filing for bankruptcy, Farmland has paid down more than $400 million in bank debt.
Bob Schuller, Farmland's vice president, general counsel and corporate secretary, said liquidation "made the most sense" because it offered the best way to maximize value for creditors. Also, Schuller pointed out, most Farmland employees won't lose their jobs.
"The vast majority of folks who have worked for the company will end up having positions with folks who acquire assets," he said.
In a news release issued by the company Friday, Larry Frazen, Farmland's lead bankruptcy attorney, said the numbers compare "quite favorably" to those in other recent bankruptcy cases. For example, he said, Kmart anticipates a 10 percent recovery payable in reorganized Kmart stock.
"Any debtor providing a 50 percent or more cash dividend to general unsecured creditors is considered to have done quite well in a Chapter 11 case," Frazen said.
A liquidation plan had been expected since the 74-year-old Farmland announced July 15 that it would sell its remaining major asset -- its pork unit -- to Virginia-based Smithfield Foods Inc. for $363.5 million.
Farmland sold its crop production business to Wichita-based Koch Nitrogen Co. in May for $293 million and has agreed to sell its interest in its beef processing business to its partner, U.S. Premium Beef, for $232 million.
A trust will be established to manage the remaining assets, including grain elevators throughout the Midwest and Farmland's interests in joint ventures SF Phosphates, Agriliance and Land O'Lakes Feed.
Farmland said it expected the reorganization plan to receive court approval by September. Ballots then will be mailed to Farmland creditors who will be asked to accept or reject the plan.