Kansas City, Mo ? Creditors are objecting to bankrupt Farmland Industries’ proposal to sell its Coffeyville, Kan., oil refinery and connected fertilizer plant.

Greenwich, Conn.-based Pegasus Capital Advisors, through affiliates, has made an offer for the Farmland assets valued at $281 million. Pegasus also would buy an oil terminal in Phillipsburg, Kan., a crude oil gathering system in Kansas, Oklahoma and Nebraska, and the inventories required to operate the facilities.

However, several creditors objected to the deal Tuesday in U.S. Bankruptcy Court.

Ten of those objections were from companies that have mechanic’s liens filed against the refinery for about $23 million.

In part, the objections stemmed from the fact that the deal Farmland has struck with Pegasus, while valued at $281 million, proposes to pay the bankrupt cooperative $22 million in cash as the value of the two plants.

Lawyers for the objecting companies said they feared Farmland would use the small valuation for the two plants as a reason to reduce their claims.

Pegasus also has agreed to pay about $85 million for the value of the petroleum products at the refinery when the deal closes. The agreement also takes into account about $174 million in assumed liabilities, including about $134 million to bring the plant into federal environmental compliance.

While the value of some of those claims might be in dispute, Larry Frazen, Farmland’s lead bankruptcy attorney, said they were secured claims and the determined value would be paid in full. He said the $107 million in cash and working capital Farmland would receive would far exceed the total value of the claims.

U.S. Bankruptcy Judge Jerry Venters offered further protection for companies with mechanic’s liens, saying that when the deal closes he will have Farmland put into escrow enough money to cover their claims.

Farmland will have an auction if other interested buyers want to outbid Pegasus.

Farmland, once the nation’s largest farmer-owned cooperative, filed for Chapter 11 bankruptcy protection May 31, 2002. Since then, the cooperative has said it would sell its assets to pay its debts.

Farmland already has sold its fertilizer and beef businesses in deals totaling $525 million. Two companies bidding for its pork business will face off in an auction next week, with bids beginning at $385 million.

Farmland has a nitrogen fertilizer plant in Lawrence that has been closed since May 2001.