story by Kim Souza
It took federal Bankruptcy Judge Ben Barry more than an hour Tuesday morning (Feb. 11) to weed through a long list of objections regarding the sale of Allens Canning to private equity firm Sager Creek.
Part of the process required Judge Barry to transfer more than a dozen claims related to the Perishable Agricultural Commodities Act (PACA) to U.S. District Judge Richard Taylor in Arkansas’ Eastern District. The claims involve produce sold to Allens for which the company has not paid for. The federal PACA oversees certain contracts related to agriculture commodities.
Once the agricultural claims were moved, Barry quickly approved Sager Creek’s $124.781 million purchase price for Siloam’s Springs-based Allens Canning.
“It’s a good deal, it’s good for the debtors and the creditors,” Barry said as he ordered the approval.
There was one holdout, which was set aside for a future hearing date on Feb. 24, as lawyers for Allens and Sager Creek were told by Barry to work out the terms with Infor Global Solutions, the accounting software company that licensed their product to Allens. The software company is claiming the license is non-transferrable. Counsel for Allens said its software the company uses daily to run its business and the new owners will need it as well.
Infor told the court it didn’t object to the sale, but something would have to be done to support the transfer to Sager Creek – likely a fee paid. Barry asked the parties to work out a deal ahead of the Feb. 24 hearing. Barry also commended Allen’s counsel for resolving more than 40 objections filed to the sale ahead of Tuesday’s hearing.
An adversarial case still has to be heard the court, but it does not impact the closing of the sale to Sager Creek. SSS of Crawford County claims that 80 acres included in the sale, does not belong to the debtors. Barry said, “Rather than throw a monkey wrench into the deal, hindering closing, the case can be heard on Mar. 21., understanding the deal is going to close with the SSS claim still hanging.”
Both parties agreed to argue the case of Mar. 21.
Stanley Bond, an attorney for several creditors with PACA claims, asked the debtor to guarantee and specify for the court how it planned to pay the outstanding claims. Barry indulged that request.
Jonathan Hickman, chief restructuring officer for Allens, told the court that an evergreen fund would be established by Sager Creek for the sole purpose of satisfying 100% of the allowed PACA claims filed with court which are subject to the resolution process.
The transcript from the Feb. 7 auction was filed with the court. The document indicated that the opening bid by Seneca Food was $148 million, less certain working capital adjustments. The bidding was a complicated issued as the three parties taking part in the auction each tailored their offers according to perceived value, subject to breakup fees, working capital or other debt obligations.
Sager Creek had the highest bid at roughly $160 million, but the purchase price was substantially lower at $124.781 million, which included money it was owed by Allens, breakup fees and working capital.
McCall Farms was deemed the backup bid with a purchase price of $119.2 million. Seneca Foods came in third offering a purchase price $117 million. There were just three bidders taking part in the auction, according to the transcript.
Little is known at this point about Sager Creek, a recently formed Delaware-based corporation, according to the court filing.
The president of Sager Creek, James Athanasoulas, is the managing director of Sankaty Advisors, a unit of Boston-based Bain Capital. Sankaty Advisors is a secondary lienholder listed among Allen’s creditors. The amount owed was not disclosed and is now a moot point given its purchase of Allens was approved.
The deal is expected to close by Feb. 28.