Judge grants canner Chapter 7 shift

FAYETTEVILLE -- On Thursday, a bankruptcy judge granted a motion by Veg Liquidation, formerly known as Allens Inc., to shift its Chapter 11 bankruptcy status to Chapter 7 to help liquidate its remaining debt.

In late April, Veg Liquidation filed a motion seeking to convert its bankruptcy status. Chapter 11 bankruptcy allows for the reorganization of debt while a company continues to operate, while Chapter 7 focuses primarily on the liquidation of debt. Bankruptcy Judge Ben Barry is hearing the case.

Barry said Thursday that since there was a lack of credible objections, the motion was appropriate.

The U.S. trustee who oversees certain administrative functions in the case had filed a limited objection to a provision of the Veg Liquidation motion that retroactively moved the date of the conversion to April 30, just eight days after the motion was filed, when a 21-day notice period is required. As a result, the request for the retroactive date was dropped by Veg Liquidation.

In late October, the canned-vegetable company filed for Chapter 11 protection in U.S. Bankruptcy Court for the Western District of Arkansas. Veg Liquidation owed its primary lenders $114.36 million and its secondary lenders $65.6 million. Sager Creek Acquisition Corp., owned by investment funds controlled or advised by two of Veg Liquidation's creditors, bought Allens Inc. at auction in February with a winning bid of $123.8 million. The total value of the deal is just less than $160 million.

According to documents filed by Veg Liquidation, substantially all the assets of Siloam Springs-based vegetable packing company Allens were sold to Sager Creek and as a result Veg Liquidation has virtually no liquid assets.

Under the purchase price, Veg Liquidation's first-lien lenders were paid in full. The price also included a credit bid as part of the second-lien secured parties' debt and the assumption of much of the remaining second-lien secured parties' debt by Sager Creek. Despite that, there is a minimum of $2.3 million of second-lien debt claims remaining against the company's estates, according to the motion.

The court filing by Veg Liquidation shows after the sale of Allens, the debtors and Sager Creek have worked to resolve disputed claims under the Perishable Agriculture Commodities Act. Sager Creek posted $7.7 million in cash in escrow, and Sager Creek's equity holders provided a funding commitment of an additional $11.66 million for a total of $19.36 million available to pay for claims allowed under the act.

Allens Inc., now owned by Sager Creek, employs nearly 1,200 people across its U.S. operations. In addition to its Siloam Springs plant and other Arkansas holdings, the company has operations in Georgia, North Carolina and Wisconsin.

Business on 05/30/2014

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