How many lawyers and bankers does it take to arrange an auction? Apparently 2.25 million dollars' worth:
Northern Beef Packers is making another attempt at financing an auction sale in an attempt to prevent its bankruptcy case from moving toward liquidation.
The Aberdeen beef plant is asking a federal bankruptcy judge to allow it to borrow $2.25 million from White Oak Global Advisors so it can hire investment banking firm Lincoln International to market and sell the 420,000-square-foot facility in Aberdeen [Dirk Lammers, "Beef Plant Seeks Auction Sale to Avoid Liquidation," AP via Aberdeen American News, 2013.09.09].
Call me naïve, but if you have to spend two and a quarter million dollars to convince someone, anyone, to buy what you're selling, you're probably selling crap.
Given all the press surrounding Northern Beef Packers' constant failure and ultimate collapse, anyone with the means and desire to buy and operate a beef processing plant already knows NBP is available. And if they aren't calling with offers now, paying lawyers and bankers a couple million to run around shouting about it won't make that phone ring much harder.
And before letting NBP borrow any money to pay lawyers and bankers, how about requiring that NBP pay the workers who still have received no checks for services rendered in the month prior to NBP's July shutdown and bankruptcy declaration?
Let's not forget how bad an investment Northern Beef Packers was from the get-go. David North notes that a project that has to resort to the EB-5 Visa program for funding isn't selling itself on its own merits:
It is a rule of thumb, though one rarely acknowledged by EB-5 advocates, that the EB-5 investments are by definition sub-par in nature. Promoters who cannot secure funding through the normal channels turn to EB-5 only as the last resort, when other options are closed to them. Thus EB-5 investments, on average, are more risky than other ones. If you wanted to raise money half-a-million at a time for a project, would you want to do so through the Department of Homeland Security? Wouldn't you rather not have to hire a translator so that the pitch could be written in another language (Mandarin, in this case)? [David North, "Big EB-5 Project is Bankrupt in South Dakota; Investors May Lose Everything," Center for Immigration Studies, 2013.07.27]
NBP is now trying to convince the same market that wouldn't invest in their project in the first place that the plant is now a great deal after proving non-investors' fears correct.
North also notes that NBP worked around EB-5 rules to get its millions, getting visa buyers to make loans instead of straight investments in the beef plant:
EB-5 investments, like the purchase of common stock, are supposed to be at risk, they are not supposed to be loans. Investors prefer loans, because they would like to get their money back, and this sets up an awkward dynamic.
In this case, as was reported in the Madville Times, an alternative publication, the first 70 EB-5 investors bought stock in the company, in keeping with the rules; then the promoters sold the next 90 investors stakes in a corporation whose main business was to lend money to NBP, making those investments appear to be closer to loans than to common stock in the packing plant. The EB-5 program is full of such shenanigans.
Apparently USCIS swallowed this bit of legerdemain, as did the 90 Chinese [North, 2013.07.27].
$2.25 million can't cover up a history of shenanigans and no returns. Judge Nail, tell NBP no. Do what the trustee wants, convert this bankruptcy to Chapter 7, and let's put the money-go-round to a quick end.
DOUBLE FACE PALM...
The state should just "nationalize" it. They could then hire a hands on manager as well as the workforce to make it work. They could still use green card workers so it could actually turn a profit. The state did that with the concrete facility in Rapid City and it made a bundle. There is no question that an avenue must be devised that puts more competition into the beef market. The question may be how long before that is corrupted as well?
NBP has left a trail of destruction that goes from Huron to Flandreau to Aberdeen. (I am not aware that, as North suggests, the Hutterites were ever involved in the beef scheme other than that it originally was to be located near the Hutterite-backed turkey plant in Huron.) The Farmers Union and the Flandreau development group are among those who were burned by this scheme. The idea of a regional packer in the center of a beef-raising and finishing area had merits in terms of the efficiencies of operating within a regional market, but it never had the promotion and backing of people who understand how such a market operates. The plant was never attractive to U.S. investors because of its shady history and the fact that to invest in it would be like betting against the house—Tyson, Cargill, JBS, and National Beef.
What is not understood by consumers is that the brands they see in the super markets are most likely produced by one of the big four. For example, JBS (the Brazilian company that bought out Swift) produces a number of brands that carry the Angus brand including Black Angus, Blue Ribbon Angus, and Certified Angus Beef. Other companies may also process the beef sold under a certified designation. To operate successfully, a processor has to supply some marketing organization that has established itself in the retail sector or it has to have people who actually know how to get beef from production floor to retail counter, or most likely both. NBP seems never to have had either.
Unfortunately, many economic development agencies that claim to be looking out for the community and the state are complicit in the fraud. They talk business and development and speak the voodoo incantations of finance, but they know or care little about businesses as part of the community and how to develop and serve a market for its products and services. But they are the people our naïve and gullible media consult on any matters of economic development and business. It never seems to occur to local media and officials in Aberdeen that the empty relatively new buildings sitting in the industrial park over which the local development corporation presides are evidence of less-than-astute personnel, who have a history of catering to fly-by-nights and drive-through sweat shop operations. The Aberdeen Development Corporation occupies a building and shares a big sign with the South Dakota Resource Center, which handled the EB-5 operation for NBP. NBP is merely the latest disaster area on a trail of ruin that the beef scheme has left, and it is massive both in terms of investors and workers.
Good faith has been systematically betrayed at every turn. Economic development schemes are what aborted the original plan for the Sanford Lab at the old Homestake, and it continues to be a persistent scam inflicted on the public because no one has had the curiosity or the courage to challenge the business venture gurus. And it is because of them that honest and competent business people won’t touch a scheme like NBP. (And why so many scientists bailed out of support of the Homestake conversion.)
Business schemes caused the Great Recession. They have created another mausoleum for an aborted enterprise in Aberdeen, which already has more such burial places than it can sustain.
Excellent David Newquist, excellent. You sir have done your homework. I do have an observation though, do you think that something like this would work if run properly? I do not mean to put you on the spot by any means. I am under the idea that something like this would work if it had the right management that would do something that most beef packing plants lack, the sanitary handling of beef. No pink slime and a complete separation of feces to product with no chances of contamination. The plant guarantees that for starters and who knows what success could follow. American consumers are getting tired of the big 4 doing as they please with the safety of the meat they consume.
Great post Mr. Newquist.
Jerry I highly doubt that even if a plant did do those things it could compete with the big four.
The people in this country are looking for cheap meat and that can only be done in a couple of different ways. Unfortunately the methods that you talk about cost money because of the time involved in processing from kill to labeling.
In todays meat market, even twenty cents a lb difference makes the consumer go to another store that sells for less.
The only way to get good meat right now is buying from a local person that you can trust and having it slaughtered,cut, and wrapped by a locker that you also trust. Sure it might cost a little more, but at least you have faith in the product when you open your freezer and take out a steak that is cut the way you wanted it cut.
Isn't that the name of the game? Lets face it any time you mass produce a product like meat, it is only a crap shoot when the consumer buys it at the store in the end. These plants are operating for cents on the lb in profits.
Is it any wonder that they take some shortcuts to achieve those profits? And is it any wonder that new plants have a hard time competing with established packers if they have to ask more money for their product then the competition? They are behind from the start. First because the critter stays at their plant longer, and then because they have to overcome a marketing hurdle that the big four just keep making higher and higher. That's competition, and that's the biz baby.
The Blindman
One only wishes that candidate Rounds would be asked and held to David's analysis by the media...follow up questions and all. Former GOP press sec Mercer won't be a party to that and the Argus and the rest don't care, so the truth will be lost outside of the blogosphere.
What Bill says about local meat and quality cuts adds some weight to Mr. Newquist's contention that NBP just isn't viable. NBP cast its lot as a local alternative, but a giant factory slaughterhouse isn't able to provide the real local, face-to-face advantage that Bill says the buy-fresh buy-local market is looking for. Mass-produced is mass-produced, whether it happens in Aberdeen, Sioux Falls, or Chicago.
Maybe that fits with David's contention that NBP's backers have no marketing savvy. They glommed onto the Rounds SD Certified Beef notion but just painted that over their traditional factory-ag mindset. That wouldn't explain the complete failure of the plant, but does it make sense as a factor?