Trustee: Turner Grain is hopeless

Go to Chapter 7, liquidate, he says

The trustee for the U.S. Bankruptcy Court wants Turner Grain Merchandising Inc., the troubled Brinkley-based grain dealer, to liquidate its assets, rather than attempt to restructure, so it can repay its debts.

Turner Grain originally filed for Chapter 11 bankruptcy on Oct. 23, listing $13.8 million in assets and $24.8 million in liabilities.

Attorney Joseph DiPietro wrote in a Feb. 20 filing on behalf of acting U.S. Trustee Daniel J. Casamatta that since Turner ceased operations in August, "there's no likelihood or intent for rehabilitation or reorganization."

DiPietro also said that Turner has failed to file monthly financial reports or supporting documentation with the court or the trustee, as well as missed quarterly filing-fee payments required under bankruptcy law. He wrote that converting the bankruptcy under Chapter 7 rules would be the most economic way to liquidate any remaining assets held by Turner Grain.

The U.S. Department of Agriculture on Aug. 14 shut down a grain elevator run by the company after finding no grain being stored there despite certificates saying otherwise. After the shutdown, Turner Grain, doing business as Turner Grain Inc., was named as defendant in several lawsuits after farmers complained that the commodities broker failed to pay them for grain worth millions of dollars and after checks received from Turner couldn't be cashed.

In September, North Little Rock attorney Kevin Keech was appointed as receiver for Turner as part of an unrelated breach of contract suit in federal court. Since then, Keech has been sorting out Turner's business dealings both with related companies and with farmers from whom it purchased grain, as well as the companies that by contract would buy the grain from it.

Keech did not return a message left at his office or respond to an email inquiry Monday.

Josh Silverstein a law professor at the William H. Bowen School of Law at the University of Arkansas at Little Rock, said it's not unusual for a party to a bankruptcy case to file a motion seeking to change what section of law is applied.

In a Chapter 11 bankruptcy filing, the debtor typically retains control over the process in a bid to reorganize the company and develop a plan to restructure debt payments to creditors that has the potential of the company's being sold, he said. In a Chapter 7 filing, the debtor loses that control as assets are liquidated and a trustee is appointed to oversee the process.

"Generally, Chapter 11 bankruptcies are bankruptcies where you're going to keep the business going," Silverstein said. "Chapter 7 is liquidation where essentially you're going to shut the business down." That means any assets are sold and payouts are made to creditors using priorities laid out by bankruptcy law.

Silverstein said that typically in a Chapter 7 bankruptcy, unsecured creditors get nothing or pennies on the dollar of what they might be owned. Secured creditors are first in line, and any remaining assets are divided among the remaining unsecured creditors with payments based on the size of their debt.

In Turner's original bankruptcy filing, made by Keech in his role as grain dealer's receiver, only one secured creditor was identified. Rabo Agrifinance of St. Louis was listed as being owed $1,012,226. Nearly 60 other, unsecured claims with a combined value of $23.8 million were identified as well.

The U.S. Trustee Program, run through the U.S. Justice Department, is designed to help administer the federal bankruptcy code, both Chapter 7 liquidations, which allow debtors to discharge their debt, and Chapter 11 reorganizations.

DiPietro, contacted Monday, referred questions to a program spokesman.

Sliverstein described the U.S. trustee as a general supervisor who looks out for the interests of debtors, creditors and the overall bankruptcy process and policies. The U.S. trustee is also involved in the appointment of a private trustee in Chapter 7 proceedings who will direct the sale of assets and distributing any proceeds to creditors.

Grain dealers such as Turner Grain are currently unregulated by the state.

Legislation, Senate Bill 555, is now pending before the General Assembly that would require grain dealers to be licensed by the state Plant Board. The measure would also allow the board to require dealers to post surety bonds and temporarily suspend a dealer license if the board becomes aware of a problem with payments or other concerns. The board could also audit and inspect dealers under the measure.

The measure is scheduled for a public hearing before the Senate Committee on Agriculture, Forestry, and Economic Development today.

Business on 03/03/2015