Kansas City, Mo. ? Over protests from unsecured creditors, a bankruptcy judge has approved a new loan agreement setting deadlines for Farmland Industries to sell assets as part of its reorganization plan.

The agreement reduces the amount of money available to Farmland and raised interest rates 2 percent on some provisions in its loans.

Kansas City, Mo.-based Farmland filed for Chapter 11 bankruptcy protection on May 31. In the interim ruling issued Monday, U.S. Bankruptcy Judge Jerry Venters said the new conditions hold “definite risks” for Farmland but that it made an appropriate decision to acquiesce to its lender banks.

With no alternative financing available, Venters said the revised loan agreement is, “all things considered, in the best interests of the creditors.” The judge said he would file a more detailed decision in 30 to 45 days.

Farmland owes about $260 million to a syndicate of banks, led by Deutsche Bank, that have provided credit since the bankruptcy filing. Farmland has paid off more than $100 million from the original loan.

In December the banks said Farmland defaulted by failing to file details of its reorganization plans by Nov. 27. Farmland said it needed more time to determine the potential value of the assets it intended to sell before it could file a more precise plan.

While Farmland believed it had not violated the loan agreement, chief executive Bob Terry said in court filings that the cooperative decided not to risk a public fight with its banks. He said that might scare off customers worried that Farmland would lose its financing.

Creditors complained the banks unfairly threatened Farmland with loss of financing so they could get better terms and asked the judge to force the banks to stick to the original loan agreement.

The new loan provisions will cut $75 million from Farmland’s credit line of more than $300 million, raise interest rates and charge a fee of $691,300.

The agreement also sets out a strict timetable by which Farmland must sell off its assets and pay back the banks. The banks could cancel the loans if a deadline is missed.

Hearings on the revised agreement were closed. The deadlines weren’t announced. The participants agreed that if potential buyers knew the deadlines, they might stall on closing deals.

Two weeks ago Farmland announced a $270 million deal for Koch Nitrogen of Wichita to buy the cooperative’s fertilizer business, but other potential buyers could bid at an auction set for March 26.

The Koch deal didn’t include Farmland’s Lawrence nitrogen fertilizer plant, which has been idle since May 2001.