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?
So will White Oak sell it to the eb-5 investors so they see some return on there investment??? Would not the money Gov Duaggard gave, have been better invested in South Dakotans than an forein government???
It is still possible that there was intent to defraud when White Oak bought the packing plant. So if they sold it, the new buyer would be clear of that.
When the lien holders were coerced to give up their lien so that White Oak would give a loan, that coercion could be seen as intent to defraud since there was some concern that the plant might go broke. This was a loan with a plan to take over real cheap if it failed. This was also included in the way White Oak and the court agreed to a very low cash part in the bid. White Oaks purchase simply has a fraudulent look to it. I have not read the law on this and who the judge would be could make a difference also.
If it can be figured out what it takes to make that packing plant profitable, the state could take the cement plant fund and buy that plant. Some in the beef business tell me that plant was a little before its time. They tell me the feedlots are moving north. They became huge in Texas feeding cattle was a tax break for the rich. It still is efficient for a dry climate in South Dakota to feed corn silage to feeder cattle since the corn in a dry year is best used by chopping the whole plant since the sugars in the stalk did not materialize into kernels. So in the future it could be a profitable business.
This is so common as to be routine in a bankruptcy. Cory, I'm going to use the bank analogy with regard to foreclosures for simplicity. I don't want this to open up the "who are a bank and should they be subject to bank franchise taxes." This would be the same thing if you lent money to someone for a car but are not in the car business.
A bank lends money for a large office building. The loan defaults and they get the building back. It is now no longer a loan but "other real estate owned." A bank (regulated entity) isn't in the business of being a landlord. However the family that owns the bank does have investment properties independent of the bank. So, they sell the building to this personal investment property company "free and clear of all liens."
My guess is White Oak is an investment company which wants performing financial investments (debt or equity) and not operating companies. They either have a related entity that holds operating companies or they have a buyer who wants the property.
In either case, they use this process to make it clear that all the old liens are no longer valid with regard to the assets and the business/assets can move forward without threat of pursuit of recovery on the old debt/investments.
In short, it really just a routine procedure in clearing up the books and a most final step in clearing out the old liens from those assets.
the EB-5 scandal is worse than anyone realizes. The visas weren't going to Chinese aliens, they were going to extra-terrestrial aliens. They wanted the beef plant so they could carry out cattle mutilations without being bothered by Border Collies or Agents. Dennis Rodman was in on it. He's from Solaxiant-9. The trips to North Korea were just a feint.
Moooo.
New Jersey's US Attorney is swarming Chris Christie. Brendan Johnson knows that timing is essential to exposing Pierre to sunlight.
Anne Beal, your comment is kind of funny, kind of a way of saying oh EB-5 is not that big of a deal, but certainly not germane to Cory's question. Some of the rest of us think it is a big deal. When I saw the article, my first thought was I thought that this was back in court, because someone had challenged the sale.
I agree with you Lanny. Anne rivializes eB-5 scandal.
This is very serious issue and we need to get to the bottom of what happened her. Anne's commentary adds nothing to the conversation
Maybe the Government Integrity Fund will look into who's involved...
Funny that group is going on the offense...or at least trying to distract from those involved in the eB-5 NBP scandal.
Wait and see how many well connected wingnuts wind up as shareholders if this place ever gets up and running. Something stinks awful and it ain't offal.
Roger, you nailed it when you said it depends on who the judge would be!!! Some of you people may remember Merle Lewis!!! The ceo of northwest public service!!!!! He was a lawyer who didn't know enough to change a light bulb but he took nwps down the tubes and they declared bankruptcy and he walked away scott free because he had the right judge!! All the shareholders lost everything they had in that company!! Any one that sat on that bench with any business smarts at all could have turned that company around without screwing all the shareholders. Look at northwestern now. Market valu good and they are paying dividends again!!!
Anne the truth is out there.
By the way Cory, I am not financially wizardous, but some more questions.
From the Wall Street Journal, at the time of the sale. http://online.wsj.com/news/articles/SB10001424052702303497804579242333031677004
"Judge Charles Nail Jr. of the U.S. Bankruptcy Court in Aberdeen, S.D., approved the San Francisco-based firm's offer of $4.8 million in cash and $39.5 million in debt forgiveness, according to court documents.
American Foods Group LLC also submitted a qualified offer of $12.7 million in cash, but White Oak was deemed the successful bidder."
If the court can forgive the liens in the event of a sale, shouldn't the judge, then have accepted the 12.7 million dollar offer?
Also from the WSJ article, "White Oak agreed to lend Northern Beef $2.25 million in bankruptcy financing to allow the company to execute this sale."
Wouldn't it be unusual if not downright illegal for the winner in a bankruptcy auction to give the bankruptcy filer the money to finish the sale?
The bid of White Oak was $4.8 million in cash to pay off prior liens and the full amount of their subsequent lien. Pretty standard.
Maybe there are issues to come from the NBP but the bankruptcy process is not one of them. But, if you want to tilt at windmills, go for it.
Gosh Mr Jones, You must not have read the first part of my post. I said that I am not a financial wizard, I was just asking questions. You don't have to rip me up for it. You aren't defending the EB-5 Northern Beef scam because it makes our party look like crooks are you?
Actually, the first question which is called for is "Why is a SECOND 363 sale being sought?" The December 5 sale WAS a 363 sale. So, without knowing the entire history of what happened between Dec. 5 and Jan. 20, it does beg the question of what is going on? If White Oak was, in fact, able to conclude the purchase at the 363 Auction, then they would have absolutely no reason whatsoever to seek any permission of the Court to resell or transfer the plant to a third party or affiliated entity. The liens do not "re-attach" after the 363 buyer makes their purchase. Therefore, the question remains: Why a second 363 sale?
Of course, if Marty Jackley had been involved in this case from the beginning (because of the State's financial interest and the fact that he has reported to the Governor that NBP improperly diverted funds derived from the State), he could be explaining what was happening in all of this to the people of South Dakota since he claims to represent their and the State's interests. Of course, it appears somewhat obvious that he has apparently abandoned his "client" for no particular reason...
Cory, Thanks all for keeping an eye on this mess. I am not sure how this thing shakes out, but it sure seems like there is something that is fundamentally wrong with this whole process. This last sale request, almost sounds like having something go wrong with your washer and then donating it to a charity business and then after they fix it and put it on the floor for resale, you buy it back for a quarter of the price it would be for a new one. You get a reconditioned machine like new, and no one is the wiser. Only in this case, the taxpayers are gonna take a beating and we do not know how it is being done to us.
Right Jerry and the EB-5 visa buyers. Probably time to hit the tip jar again.
What assets are White Oak attempting to sell? If it is the equipment, that would much indicated that the plant will never reopen for its intended use.
Are the building and properties a part of the assets being sold?
By all appearances it seems that White Oak had intended to do this all along, the question is, how will this give White Oak any monetary gain?
Wouldn't you fellows be shocked if you found out that ol' grudznick was a completely sane financial wizard at the top of the pack back in his day? No?
Well, ok then. Would you be shocked if you found out that I am a big fan of cheeseburgers?
Looks like corporate asset flipping with the bankruptcy trustee as the facilitator. Maybe a future owner will sell everything that isn't bolted down and develop it for some other commercial use or lease it to the State of South Dakota as a conference center, NSU research facility, etc.
Or maybe ol' grudznick can acquire the title to the building, get some economic development money and mass produce cheeseburgers.
That would be good, Mr. Mark, good indeed.
grudz, I am inclined to believe the former rather than the latter. But not knowing if you are from Sioux Falls, my test may not work. But if you are or get here once in awhile, JL Beers or 5 Guys on those cheeseburgers?
Some of Anne Beal's Facebook posts from last 5 days:
"I don't listen to Rush and I don't need FOXnews to tell me that the POTUS is an incompetent, Marxist pig."
"Listening to the Supreme Court arguments about Massachusetts' 35 foot buffer zone around abortion clinics and wondering if Walmart can have such a buffer zone for protestors?"
"this is funny, apparently the pro-abortionists think women in South Dakota aren't having enough abortions. Abortions are for wimps, Real Women go to term. South Dakota is not for wimps!"
(a reposted meme) "I just wish someone had already tried communism so we could see if it really works or not."
"I have a new cause. The Hollywood celebretards are right: we have a dangerous culture of gun violence in America. Ergo, we need a ban on all guns in television and movies. All violence will have to be depicted with the more esoteric martial arts. This will be much more difficult for the actors, who can be replaced with CGIs. They should be hAppy to lose their careers for the cause. Happy happy happy"
*****
Find your zen place, Anne. You need one.
Taunia, I agree a very angry person.
Mr. Stricherz, I apologize but I do not understand your question. If it is to have me choose between 2 cheeseburger places in Sioux Falls I cannot do so. I am not familiar with either the 5 cheese place or the JL place. Years have passed since my Sioux Falls visit. I cannot even rate breakfasting there. Is there still that pancake place by the Russel street Minnesota interchange?
Attempts to explain away this motion which is of suspicious nature to most people is based upon some rather elaborate conjectures in this thread of discussion. The financing of Northern Beef Packers was a shell game in which the investors were anonymous and its bankruptcy sale is an apparent continuation of that game. There seems to be an assumption in the reporting and discussion of NBP's demise that the Korean and Chinese lenders are foreigners who have no recourse in recovering their losses. However, the EB-5 program does not provide for investing directly by buying shares, but terms the investments loans. The money provided NBP came from loan pools organized by the South Dakota Regional Center. The question raised by the motion to remove the obligation to meet any liens and encumbrances from any sale of the properties is whether the loans are in any way secured or create encumbrances that will transfer to any purchaser of the company. The bankruptcy code has a number of stipulations and conditions to be met in any court decision removing obligations from any transfer involved in the purchase of assets.
The exact status of the rights of lenders in the EB-5 program has never been stated or explained. However, if one Googles Norther Beef Packers and looks at the reporting by the agricultural journals and business journals that cover the EB-5 program, the skepticism and contempt for the NBP debacle is almost unanimous.
Finance is not rocket science, but it is made to seem so by those who want devious and shady schemes covered up under a layer of convoluted, sometimes perverse, laws.
Last month, the Center for Immigration studies characterized the whole affair this way: "Unlike Watergate, however, the basis was not political espionage, it was plain old crony capitalism, greed, and patronage, all played out at the state level while manipulating a federal program, EB-5. As in Watergate, the most obvious victims, the Democratic National Committee in that case, and the Chinese investors in this one, are all but invisible. "
If it is difficult to understand the process and motions in disposing of this case, it's because the matter is being deliberately obfuscated in the hopes the the public will shrug it off as being too complicated for ordinary people to understand. Nevertheless, most people recognize crooks when they encounter them.
http://tinyurl.com/oms6vvu
According to this article,Oak Global Advisors lent NBP 35 million bucks last September. NBP is 41% owned by S Korean investors. Plus there are more related stories at the bottom of this one.(in case you weren't already aware of this)
Mr. Grudz, where does one find the most delicious cheeseburgers in your neck of the woods?
grudz, The place you refer to was Cracked Pot North. It was then purchased from the Truck Haven Corporation by one of their employees and renamed, KC's. It has since reverted to Crack'd Pot and yes is still there. It no longer has the North connotation because the South one on South Minnesota Ave is no longer there.
Thank you Mr Newquist for the explanation. You wrote, "If it is difficult to understand the process and motions in disposing of this case, it's because the matter is being deliberately obfuscated in the hopes the the public will shrug it off as being too complicated for ordinary people to understand. Nevertheless, most people recognize crooks when they encounter them."
Your description sounds very much like the new fangled financial instrument, "derivatives", which in large part caused the collapse and near death of economies of the world in 2008 and the loss of much of their retirement for many seniors as well as homes and businesses for the rest of society. Hopefully unlike that case in which no bankers or members of the financial community were prosecuted, we as a society are not going to let the crooks, which you so ably describe, the perpetrators in this case, get away with their shenanigans.
Troy has a point that this is, in some measure, standard bankruptcy practice - now I'll tilt at the windmills. It ought to also be standard bankruptcy practice to make the taxpayers whole - even if it takes the boats, houses, cars, and kids college funds from the principles involved. It's called responsibility. It's called accountability. Those were once republican values and virtues. The taxpayers are not a permit-able socialized cost, unless of course, the taxpayers are co-owner and are co-profiting. (Collecting taxes are not profits.)
"they clear the debt they incurred keeping NBP afloat with mystery money, and a new buyer gets to take a run at realizing the economic dreams of Mike Rounds et al. without the legal complications" and without redeeming the South Dakota taxpayers.
Meat consumption in the US is way down. It is insane to think NBP has an economic future that isn't propped up with more taxpayer funds, special credits, and other shenanigans.
So the construction workers at NBP were Korean nationals. Doesn't that break immigration and EB-5 law?
http://cis.org/north/more-wrinkles-south-dakota-investor-visa-scandal
Why is it that the currant thinking is "use taxpayer money to cash flow a buisness to locate here to South Dakota"?
You are so right, Mark, and the Governor even carries it further with using tax dollars to relocate workers here for current employers. The State is so far out of bounds on economic development, and the Republican party no longer looks like Republicans. TIFs and other creative ideas go plenty far to help business. But to out and out spend taxpayer dollars to bribe businesses and to finance businesses goes too far. When I worked at Citibank, they like other businesses looking for people who were IT literate, were paying 5 and 10 thousand dollar bonuses to attract such people. All of a sudden, South Dakota government thinks it is their job to recruit for businesses.
Sid: That is a good question except I see it more often than not when the senior secured lender (White Oak) and successful bidder wants to transfer the assets to a related or unrelated buyer close to the original bankruptcy. I'm not a bankruptcy attorney or one intimate with the mechanics. But, because it occurs routinely, I don't think it indicates anything nefarious.
John: As much as you think (as do I) that it would be good if the South Dakota taxpayers were made whole for their investment, the over-riding public policy law is bankruptcy law which is blind to the source of the capital. It solely looks at the lien priority. And, as the state's priority was junior to White Oak, we are out our money.
Plus, whether you agree with public incentives for job and economic development or not, by definition, the public incentive (to be an incentive) likely takes more risk than some of the private money. It is that way with SBA programs, GOED programs, Department of Entergy, etc. programs.
In the case of NBP, I think the risk could have been reduced with proper planning, oversight and management. That is the state's failure in this mess. When accountability is mentioned, everyone scurries like rats.
I find it odd that the EB5 dollars would be less secured than the White Oak note. It appears the NBP fiasco was designed for profit from a failure..
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Obviously Nall felt very charitable towards White Oak compared to the earlier 100+ Mil liabilities.
Still,wouldn't it be nice for the citizens of South Dakota to be able to know where all the money went and why,and also who may have made out like bandits when this is all said and done. I'd certainly like to know how state officials were involved and what mistakes/failures they had so it doesn't happen again. And I don't live in South Dakota.
Les, why do you find it odd? What do you mean he was charitable?
Why would the judge allow White Oak to recapture all their liabilities and leave all other liabilities hanging in the wind Troy. I find it hard to believe a loan that late in the game as White Oak was, carries senior security.
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Generally speaking, loans made to a sinking ship are the least secured. With NBP carrying 138+Mil in liabilities and this loan made in 09/2012, how is it ahead of all others as a secured?
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The other bidder from Wisconsin must have had to bid up to the 42Mil that White Oak won the sale at. That had to have been a cash bid not? Distributed across all senior liabilities? Even The Green Bay opening bid of 12 Mil was substantially more cash into all liabilities than the 3 or 4 Mil cash White Oak topped their bid with.
Les,
It was senior. Senior isn't about time. It is about position/subordination. All other lenders agreed to subordinate to White Oak when White Oak put their money in.
Generally speaking, there is no defacto position with regard to security priority. It is all negotiated. Period. Simple.
Regarding your last paragraph, simply:
1) Yes, the Green Bay bidder would have had to bid more than $42mm.
2) Yes unless the senior lender (White Oak) was willing to take other consideration than cash.
3) Yes. The winning bid is distributed to senior lenders until the money wins out. In this case, White Oak was the lender after the first $4.8mm. Anything above $4.8mm up to $42mm would go to White Oak. If the winning bid was above $42mm, the money would go the next senior lender until repaid in full and then the next lender and so on.
4) Since White Oak (the lender after the first $4.8mm) was willing to accept its own note (as is the next lenders option to determine what is acceptable consideration) above $4.8mm in cash, the judge approved it which it is required to do as a matter of law.
It is about time, to the extent the holders of the 100Mil in liabilities had the senior status... until relieved by their own? consensual subordination to White Oak.
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Somewhere someone was sold a bill of goods for that to have happened in my opinion.
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Was White Oaks attorney Roger, Marshall Damgaards younger brother?
Folks-Troy is dead on and may have, unknowingly, begun to expose the whole problem with this mess. Let's go back about a year and relive the moments which have taken place.
1. We know per Bob Mercer's stories that there was an ongoing Federal Investigation which had been in process for well over a year at that time.
2. In March, the Gov and Ag got a big heads up when a Grand Jury Subpoena was served on GOED for eight sets of records.
3. By this time last year, White Oak was the most senior secured creditor for all the assets of the Beef Plant (save and except the excavation lien and the property taxes).
4. NBP was in dire financial straits and lacked enough capital to operate anywhere near capacity which was causing money to be wasted through inefficient use of the facilities.
5. The City of Aberdeen was not only fining NBP, but was making noises about not renewing the temporary wastewater permit due to faulty facilities.
6. By July, the Beef Plant was effectively out of business and unable to operate at all, hence the Bankruptcy filing.
7. White Oak and NBP immediately came in and asked that White Oak be permitted to provide nearly 5 million in post-petition financing with such financing being given "super-priority" status as regards all other creditors and that a 363 sale be set up.
8. The judge balked at the numbers.
9. The request was revised somewhat resulting in about half the requested amount being approved by the Court.
10. The 363 Auction is held and White Oak bids nearly 40 million of what they are owed plus cash to cover those more senior secured creditors which makes them the winning bidder.
11. Last week White Oak files a motion to conduct a NEW 363 sale.
Here is what is wrong with this picture: Usually, where there is this type of bankruptcy estate, White Oak would come in and file a Motion to Lift the Automatic Stay which, if granted, would allow them to conduct a foreclosure sale which would have extinguished all the liens and unsecured creditors except for the liens which they have now agreed to pay off. Such a motion would likely have been granted since there was no equity in the plant and the value of the security (an idle plant) was deteriorating every day it sat idle. Once the foreclosure took place, White Oak could transfer the plant to any entity it chose on whatever terms it wished.
Instead, we get this lenghty (and very expensive) litigation and 363 sale process which is normally done when the entity does not see a way to reorganize (Hostess Twinkies?) and wishes to cease doing business. The problem is that White Oak would have known all along that the cheapest and most expedient way to get any money out of the plant would be to foreclose and not fool with all the 363 issues.
Therefore, there is something which is happening right under the noses of everyone interested in this bankruptcy case which is being effectively hidden by the various machinations which have been taking place. However, by doing the 363 route, it has effectively produced a barrier to any complaints by other creditors about whether White Oak's total debt was legitimate and provided a defense to such complaints by being able to say "well, the Court approved it all."
There is an answer to why all this has happened, going back to the original loan of White Oak in the fall of 2012. I would posit that if the investors who furnished the funds advanced by White Oak are known, then this will all make a lot of sense. I would suspect that they bear some relationship to the "unknown" investors who used Epoch Star to make a 30 million dollar loan of which only 3 million was funded yet over 5 million was paid to extinguish. The final basis for this hypothesis is that Epoch Star, just like White Oak, engaged in a lengthy dog and pony show before the State Banking Commission which was unnecessary, but which placed a "seal of approval" from the authorities who are responsible to regulate these transactions.
What has never been reported on the NBP bankruptcy is a simple list of what entity lent what amounts to the firm. And in the matter of determining senior creditors, what is the collateral that secures their loans, and where are the records of how their senior status was determined? The national financial journals keep noting the lack of information and secrecy of actions that are supposed to be done in full scrutiny of the public.
But all this legalese, financial mumbo-jumbo does not justify the fact that Korean and Chinese investors lost the largest share of loans, $60 million, and legal action, which could change the numbers for White Oak is alluded to in the national journals but not mentioned in the South Dakota coverage.
All the verbiage does not disguise the stench of this whole affair.
Thanks for your explanations, Troy and Sid. Sure makes me wish I had a law degree. This certainly sounds like there were some misdealings. If the judge could accept White Oak's bid 4.8 million dollar bid added onto their lien of 42 million rather than the 12.7 million dollar bid by American Foods, then why did White Oak have to add the 4.8 million? Who were they and the Judge making whole with 4.8 million?
In the bankruptcy record is a list of not only who got the $4.8mm but who all the other creditors were. Matter of public record. My suspicion is the $4.8 million is:
1) Mechanics Liens. People who do work on a facility can file them and they step in front of other creditors.
2) People who sold cattle to the operation (or potentially the Stockman's Fund (can't remember the formal name) which is basically an insurance pool that protects people who sell livestock to packers.
3) Labor: As a matter of law, back wages step in front of other creditors in a bankruptcy.
The total of $4.8mm doesn't sound out of line for an operation of this size.
Sid, I'm not so sure the additional 363 sale is out of the ordinary for a matter this complex. Unlike other bankruptcies where the amounts aren't worth the cost of litigation, these amounts are. So, in what may be an abundance of caution or prudent action, WO is going with the more safe approach which is within its rights.
Finally, three comments:
1) I disagree that White Oak is "bad guy" here. They put in $38 million plus $5mm more in a last ditch effort to make the plant viable. I'm pretty sure they wish they hadn't and will not get all their money back.
2) I don't get the consternation about the lost money from the Chinese and Korean investors. They invested this money with two objectives: To get a return on their money and a permanent green card. They were sophisticated investors who made a mistake. While like White Oak, I'm sure they wish they hadn't done so, investing is a risky proposition, especially in a start-up.
3) I'm not trying to minimize the fiasco this is. At the same time, to assert there was rampant "misdealings" is not supported at all by the facts.
Thanks for the further explanation, Mr Jones. As to number three, is that because it was done under our party's watch? If it were done by someone on the left, the right would come down on it, like stink on crap.
At the end of the day, this is a failed business venture. Whether it was a fundamentally flawed business plan, poorly executed business plan, or one where economic fundamentals turned against the venture is a matter of debate. But, if there was a "winner" in this, I don't know who it was. Maybe Joop? But, it certainly wasn't Rich Benda who in the end lost everything.
Some failed business venture, of course, you are drinking Troy, before the end of the day. Maybe it is just me, but when I have seen "failed business venture" in the past, the US attorney was not looking at it.
Well, Troy, I guess then that it would make it like so many other ventures that the State has gotten involved in Since the start of the Rounds administration, like DM&E, Coal Power plants in Selby and Big Stone, as well as the one tied to the Hyperion oil refinery, which also didn't happen, (probably couldn't find enough EB-5 investors) two of the ten CAFO dairy operations that were started. And then of course we have the Keystone pipeline that promised our school districts all kinds of property tax dollars if they could get approved, but that never materialized did it? Then we also have the Anderson Seed Company debacle, in which the PUC didn't require a large enough bond, so when they left, they cost SD farmers millions of dollars.
And finally we have the disgraceful scene that happened down by Marty, when the Iowa CAFO hog farm near Hull wanted to come to South Dakota and put one of their CAFO operations two miles above Marty, (I say above, because everything flows downhill from where they put the operation to Marty and then to the MIssouri RIver). Then when the Yankton Sioux Tribe had folks picketing to keep the Iowans out, Governor Rounds sent 31 Highway patrolmen to protect the Iowans.
Maybe it is time for the State government of South Dakota to get out of the business of business and let the Chamber of Commerce handle that job.