Published in Food/Agribusiness

Inability to refinance short-term debt pushes SW Michigan meat processor, cattle farm into bankruptcy

BY Wednesday, August 26, 2020 03:57pm

SCOTTS — The owners of a Southwest Michigan meat processing company and cattle operation say the businesses have fallen victim to the tight credit market brought on by the COVID-19 pandemic. 

Scotts Hook & Cleaver Inc., a custom meat processing company that does business as Pease Packing, and B&G Crop Farms LLC, which does business as Gibson Cattle Co., on Tuesday filed for Chapter 11 and Chapter 12 bankruptcy, respectively, in the U.S. Bankruptcy Court for the Western District of Michigan. 

Attorney Kerry Hettinger of Kalamazoo-based Kerry Hettinger PLC said the companies, which are owned by Robert and Martha Gibson, are generating revenue and growing, and are backed by “plenty of assets.” 

However, the Gibsons ran into problems this year during the COVID-19 pandemic, which caused significant disruption in the credit market. Those disruptions in turn led to difficulty in refinancing some of the short-term debt the Gibsons took on after a 2013 expansion, Hettinger said. 

“In all the expansion, they had engaged in some short-term finance that they expected to be able to turn into more of a long-term note,” Hettinger told MiBiz. “This year has been terrible for anything like that getting done. … COVID put a pinch on us and made the refinancing difficult to process.”

Instead of refinancing into long-term debt, the Gibsons turned to expensive short-term online lenders for quick access to cash, Hettinger said. 

“They want to get immediate access to bank accounts and receipts, and you lose your ability to pay for day-to-day expenses. It’s a downhill thing and it just snowballs on you,” he said. “In a normal market environment, given there’s plenty of equity and income, they would have been able to deal with this.” 

After several of the creditors — including Grandville-based Cole Carter Inc., Chicago-based Lender Online LLC, Berrien Springs-based Honor Credit Union, Lake Odessa-based Musgrove Grain and Zeeland Farm Services Inc. — sued the Gibsons’ companies in the 9th Circuit Court in Kalamazoo County, they decided to file the bankruptcy cases to buy them more time to line up new lenders, Hettinger said. 

“With the whole package, they’re hoping to be able to pay back 100 percent of the creditors, they just needed time to get the refinancing in place,” he said. “They’re hoping they’ll be able to do that. There’s plenty of assets.”

Hettinger said the Gibsons also plan to file for personal bankruptcy. A fourth bankruptcy filing for a company called Stumpbreakers LLC that owns the real estate at the meat processing facility is also expected, he added.

Pease Packaging lists $869,651 in assets and nearly $2.3 million in liabilities, including about $234,000 in unsecured debt, according to court filings. Unsecured creditors include the IRS ($144,649 for back payroll taxes), Grandville-based Kent Butchers Supply ($27,960), Honor Credit Union ($22,510) and Schoolcraft-based Pakkers Inc. ($4,058). 

The company’s assets include $15,000 in hanging beef, $30,000 in freezer beef and $12,000 in spices, according to the filing.

Year to date, Pease Packaging generated about $218,000 in revenue, which compares to nearly $781,000 for all of 2019. 

Meanwhile, Gibson Cattle Co. lists more than $3.9 million in assets — including 289 head of cattle — and nearly $9.7 million in liabilities, according to court filings. The company also lists $2.2 million in unsecured claims, many of which involve West Michigan-based companies. 

The largest local unsecured creditors include Musgrove Grain ($369,092), Honor Credit Union ($367,110), Union City-based Dove Ag Services ($114,462), Zeeland Farm Services Inc. ($33,073), Kalamazoo-based Carleton Equipment ($31,255), Dorr-based Burnips Equipment Co. ($28,991) and Three Rivers-based Koviack Irrigation ($27,251). 

Other unsecured creditors include Texas-based Ag Resource Management ($482,239), Minnesota-based Receivables Control Corp. ($242,844) and Indiana-based Beck’s Hybrids ($190,797).

Year to date, the farm generated more than $112,000 in revenues, which compares to $846,000 last year, according to court filings. 

The first hearings are scheduled for 9 a.m., Aug. 28 in the Pease Packing case and for 10 a.m. Sept. 3 in the Gibson Cattle Co. case. 

Read 12180 times