(In today's Freudian slip, I first type White Oaf.)

White Oak Global Advisors from San Francisco announced yesterday that it finalized its acquisition of Northern Beef Packers in Aberdeen. White Oak's press release (text below, as prepared by Sioux Falls ad firm Fresh Produce) is more about saying nothing than explaining anything. The previously publicized purchase price is $44.3 million, but White Oak is really spending only $4.8 million in cash; the remainder is White Oak cashing in chips it previously put on NBP's table to keep the state-backed money-mashing machine creaking along into its bankruptcy last summer.

Remember, Northern Beef Packers made $80 million in EB-5 investment and $152 million in total investment capital disappear in its five years of construction and nine months of abortive operation. White Oak—or, more accurately, the newest shell corporation to be tangled into Northern Beef Packers, New Angus LLC, which as of this morning does not appear in South Dakota's corporate database—is acquiring this asset for a bit more than three cents on the dollar in new money.

David Montgomery reports that White Oak/New Angus may have trouble recouping even that meager investment:

Cattle industry expert Steve Kay, publisher of Cattle Buyers Weekly, was doubtful. With the U.S. cattle market declining and a half-dozen competing meat-packing plants already open in the region, Kay said there’s not room for another packer.

“It’s tough for me to see that White Oak’s new operators can possibly compete against six other packers, all competing for the same shrinking supply of cattle in the region,” Kay said. “The new owners, I don’t know how well they know how the beef industry actually works. I wish them the very best, but they will need more than luck” [David Montgomery, "Investment Firm Completes Purchase of Beef Plant," that Sioux Falls paper, 2014.04.01].

Here's the White Oak press release, which is all board-room bluster and the obligatory "move forward" but mostly a pointedly explicit refusal to say anything specific:

New ownership for Northern Beef Packers presents new opportunity

Sioux Falls, SD – White Oak Global Advisors, LLC (“White Oak”) is pleased to announce the purchase of the operating assets of Northern Beef Packers Limited Partnership (“Northern Beef Packers”). The beef packing plant and associated assets (the “Facility”) were purchased free and clear of past liabilities and obligations by New Angus, LLC, a new entity established by White Oak.

The purchase removes the Facility from the Chapter 11 bankruptcy proceeding of Northern Beef Packers, providing the plant an opportunity to move forward unimpeded by its previous financial obstacles.

White Oak is currently evaluating its strategic options and remains confident in the Facility’s future as an operating plant. The Facility has the potential to be a success for both the community and its stakeholders. White Oak views the purchase as an investment in both South Dakota and its surrounding
communities.

White Oak will not be available for comment at this time, but looks forward to providing additional information as time and circumstance allow [White Oak Global Advisors, press release, 2014.04.01].

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Has White Oak already found a sucker buyer for Northern Beef Packers?

An eager reader catches notice of a motion filed in bankruptcy court by White Oak Global Advisors on Monday, January 20, seeking authority to sell Northern Beef Packers assets under Bankruptcy Code Section 363. That section appears to allow the sale of assets from a bankrupt entity "free and clear of liens and encumbrances."

Hmmm... White Oak won Northern Beef Packers at bankruptcy auction in December for pennies on the dollar. If White Oak turns NBP over for a few more pennies, they clear the debt they incurred keeping NBP afloat with mystery money, and a new buyet gets to take a run at realizing the economic dreams of Mike Rounds et al. without the legal complications NBP has accrued in its failed start-up period.

I invite commentary from financially wizardous readers: what does this motion mean? Who's the next contestant in keeping Aberdeen alive?

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White Oak Global Advisors of San Francisco bought Northern Beef Packers at bankruptcy auction yesterday. They put up only $4.8 million in cash, compared to the $12.75 million in cash offered by actual meat-packing company American Foods Group of Green Bay.

David Montgomery can smell the manure from his office:

It’s entirely possible that White Oak’s loan was intended from the very beginning to be a stealth purchase of Northern Beef. We don’t know, because the company has refused to comment. Northern Beef attorney Rory King told the Aberdeen American News that White Oak “might open and market (the beef) plant.”

The purchase is the latest twist in Northern Beef’s debt. Earlier, the company took out a $30 million loan — and then negated the loan by buying the lender. Then Northern Beef borrowed $35 million from White Oak — and had that loan erased when the lender bought it [David Montgomery, "Another Twist in the Northern Beef Saga," Political Smokeout, 2013.12.05].

White Oak bought the company to which it loaned millions. It now owes millions to itself. The disposition of that loan is as fishy as the disposition of the loan Epoch Star made to NBP before NBP bought it in 2010. Huge sums of money are appearing and disappearing... and the state is sitting idly by, refusing to take action in what looks more and more like a crooked shell game.

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Bankrupt Northern Beef Packers of Aberdeen goes up for auction right after lunch today at the federal courthouse in Sioux Falls. In a market dominated by four big companies, guess who the first bidder is? Number Five:

American Foods Group, of Green Bay, Wisc., has been approved as a qualified bidder and has submitted a $12.75 million bid on the plant, according to paperwork filed this morning in the bankruptcy case. The bid meets the minimum bid set earlier in the case.

American Foods' meat products include Yankton-based Cimpl as well as Dakota Premium Foods, Northland Kosher, Gibbon Packing, Green Bay Dressed Beef, Long Prairie Packing and Skylark Meats [Scott Waltman, "Green Bay 'Packer' Submits $12.75M Bid for Beef Plant," Aberdeen American News, 2013.12.04 ].

From the packers' website:

American Foods Group provides wholesome, on-time delivery of the freshest beef from America’s heartland. We are the 5th largest beef processing company in the country, ship over four million pounds of beef a day, have developed our own brands and export to over 38 countries [American Foods Group, company website, downloaded 2013.12.05].

With four hours to go until bid time, American Foods Group is the only challenger to California financier White Oak Global in the bankruptcy sale.

In the Long-Blog-Reach-for-Connections Department, Governor Dennis Daugaard has named Aberdeen attorney Rick Sommers to replace retiring Fifth Circuit Judge Jack Von Wald. Sommers has lawyered for Bantz, Gosch, & Cremer, LLC, since 1989. One of his partners in the firm is Rory King, attorney for Northern Beef Packers.

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The items I've posted about the Northern Beef Packers bankruptcy and the doomed slaughterhouse's crazy financing—EB-5 investor money, corporate welfare from Mike Rounds, secret emergency investors, offshore transfers—represent just a fraction of the documents, tips, and questions I've received from various interested parties.

Out of that pile of both informed and wild speculation, one bit of dot-connecting leaps out and stops me cold this morning... and makes me wonder if Judge Charles Nail needs to stop the December 5 NBP bankruptcy auction.

Back in July, San Francisco-based investment firm White Oak Global Advisors filed a cash collateral motion in the NBP bankruptcy case. NBP says it owes White Oak $51 million for even emergency credit extended just last year. White Oak acts as the agent for Epoch Star Limited, the lenders who saved NBP with a $30 million loan in 2010. According the debtor-in-possession agreement NBP filed that month, Epoch Star Limited would act as guarantor of the immediate loan NBP needed to arrange its bankruptcy auction.

But hold on: as we learned this month, Northern Beef Packers bought Epoch Star Limited in 2010. Epoch Star's secret investors promised a $30-million loan, provided just $3 million, then let NBP buy them out for $35 million. $32 million thus went out the door to the British Virgin Islands.

Epoch Star may just be a piece of paper, but that piece of paper is in court saying it has the assets to guarantee a bankruptcy loan. Northern Beef Packers owns Epoch Star. Northern Beef Packers thus owns those assets. But Northern Beef Packers's declaration of assets says Epoch Star is inactive and its shares are worth nothing. NBP says it has no assets other than $60 million in land and buildings and $19 million in equipment, plus some loose change in the office couch cushions.

How can an inactive, valueless entity guarantee a loan for a bankrupt company that owns it?

If NBP's declaration of assets is true, White Oak offered bogus security for the bankruptcy loan. If Epoch Star really could guarantee the loan, then its owner, Northern Beek Packers, is sitting on a whole tub of assets that it hasn't declared to the bankruptcy judge.

Whichever is true, Judge Nail should suspend the auction and demand that Northern Beef Packers and White Oak Global explain the status of Epoch Star Limited.

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If corporations are people, why do they get different bankruptcy rules?

Some South Dakotans who've gone broke recently have asked about the difference between their situation and that of companies such as Northern Beef Packers, an Aberdeen firm that is still in court over its bankruptcy filing.

According to Teresa Ghilarducci, chair of the economics department at the New School of Social Research, the laws governing corporate bankruptcy were written to be fundamentally different from consumer bankruptcy laws.

"Individuals responsible for the corporation are often protected from any of the costs, whereas an individual who gets into debt, they're presumed to pay most of the cost back," she said.

..."The bankruptcy laws presume that the individual was stupid or immoral," as she described the situation. "Corporations are presumed to get into bankruptcy situations through no fault of their own."

..."Corporations often use bankruptcy in their business model," she said. "People who didn't have any role in the corporation bankruptcies actually often have to pay the price" [Jerry Oster, "Northern Beef Packers Example of How Bankruptcy Laws Protect Corporations, Not People," Northern Plains News, 2013.11.11].

When individuals go bankrupt, the suffering falls mostly on their shoulders. They suffer major household upheaval and pain, while major creditors suffer minor inconvenience. When corporations go bankrupt, the suffering falls on the communities that lose jobs and tax revenue and residents to fill their apartments. Doesn't justice require that the consequences for bankruptcy be greater for those who cause more public harm?

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Folks looking to buy one slightly used, poorly built beef plant won't be able to drop in, kick the tires, and make a bid the day of sale... not without some fast driving. The auction of Aberdeen's Northern Beef Packers facility will take place Thursday, December 5, at 1:15 p.m. Central Standard Time... in Sioux Falls, 206 miles down the road.

Scott Waltman reports that the minimum opening bid is still $12.75 million. Bidders must evidently show they have at least 10% of that amount in hand before the day of the sale. Bankruptcy Judge Charles Nail will conduct the bidding at the federal courthouse on Phillips Avenue.

Bidders interested in knowing what they're getting can try calling CEO David Palmer at the plant in Aberdeen. I hear his car is still parked out front of NBP. He may not be eager to chat and give tours, but hey, he should do something to earn one of the few paychecks NBP is still writing.

If Palmer doesn't answer, bidders will have to settle for reviewing NBP's record of assets submitted by CEO Palmer to Judge Nail on August 2. The short list:

  • Land and buildings: $59.9 million.
  • Furniture, fixtures, and equipment: $16.5 million.
  • Payments receivable: $1.9 million.
  • Cash in the bank: $942K.
  • Five vehicles (three vans, two pickups): $17,800.

Hey, there really are some tires to kick!

So make it a day in downtown in Sioux Falls! Browse the Cliffhangers Gallery. Keep your ears tuned for pre-bid chatter at Minerva's mighty salad bar over the lunch hour. Then stroll down the block and buy your true love an Aberdeen beef packing plant for Christmas for pennies on the dollar.

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On sale December 5: one modern, slightly used beef packing plant, fully loaded, just add beef and make burgers! Plus scenic views of beautiful Aberdeen, South Dakota, and the Brown County prairie.

The bankrupt Northern Beef Packers project has made $152 million in EB-5 visa purchases and state and local tax dollars disappear. The plant itself is valued at $115 million dollars. But on December 5, you can walk into this state-of-the-art money pit for the low low price of $12.75 million. That's pennies (11.1 pennies, to be precise) on the dollar!

Act now! Supplies are limited! Get your piece of South Dakota economic development boondogglery today!

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