HELENA-WEST HELENA -- A federal bankruptcy judge on Thursday granted a motion to liquidate the assets of Turner Grain Merchandising Inc. rather than have a receiver attempt to restructure its debt so it can repay creditors.
The receiver for the Brinkley-based grain dealer filed for bankruptcy in October after being shut down in August when federal investigators determined no grain was being stored in an elevator run by Turner Grain despite certificates stating otherwise.
U.S. Bankruptcy Judge Phyllis M. Jones granted the request made by the U.S. Trustee Program in February to convert Turner Grain's bankruptcy from a Chapter 11 reorganization to a Chapter 7 liquidation. None of the attorneys representing interests in the case, including Chapter 11 receiver Kevin Keech of North Little Rock and attorneys representing the unsecured creditors committee objected to the move.
After the hearing, Keech said the new trustee will represent the estate of the bankrupt company, controlling the case and the liquidation of assets, with the proceeds going to creditors. In its initial bankruptcy filing, the company listed liabilities of $24.8 million and assets of $13.8 million.
Keech has been working to determine what other assets might be available to the failed grain dealer. Since the bankruptcy, farmers and others who dealt with the company have filed lawsuits in state and federal court claiming millions of dollars in losses. Most of those suits were folded into the bankruptcy case, and a motion is pending before Jones to allow some of the cases to be remanded back to state courts.
When asked what other assets are yet to be identified, Keech said unraveling how Turner Grain operated has proved to be complicated because grain was being moved between farmers, trucking companies, other dealers and users. Keech took possession of all property, documents and electronic files held at Turner Grain Merchandising in September 2014, after being appointed the receiver as part of an unrelated breach-of-contract suit filed in federal court.
"Nobody really knows right now," what other assets might exist, Keech said. "This will have to be figured out in the litigation process," adding that creditors are approaching the case in different ways in their effort to recover money owed by Turner.
In 2012, Turner Grain Merchandising, also doing business as Turner Grain Inc., reported gross revenue of $223.8 million, according to the bankruptcy filing. The filing said the company had gross revenue of $277.9 million in 2013 and $235.3 million in 2014 through the October filing date. However, Keech said the company had a very thin profit margin and that nearly all of the revenue was used to pay for grain and cover other business costs.
Jane Limprecht, a spokesman for the U.S. Trustee Program's executive office in Washington, D.C., wrote in an email that a Chapter 7 trustee is appointed soon after a conversion order is entered by the court.
"Typically, a Chapter 7 trustee will collect assets that are not exempt from creditors, liquidate the assets, and distribute the proceeds to creditors," Limprecht wrote.
Also Thursday, Jones granted a request to block a motion filed by the unsecured creditors committee to question Neauman Coleman, the uncle of Turner Grain President Jason Coleman, because of the decision to convert the bankruptcy from Chapter 11 to Chapter 7.
Nicholas H. Wooten, an attorney for the creditors committee, told the judge that Neauman Coleman ran Turner Grain when his nephew became indisposed in the summer of 2014 and was also a partner in several companies affiliated with Turner. Wooten, of Auburn, Ala., represents Southern Rice & Cotton, a federally-licensed warehouse based in Harrisburg, which sold grain to Turner Grain. The bankruptcy filing said that Southern Rice & Cotton is one of the largest unsecured creditors, with an unsecured claim of more than $3.2 million.
Southern Rice & Cotton filed a lawsuit in Poinsett County Circuit Court in September 2014 seeking payment from Turner Grain. While the suit named Turner Grain, Jason Coleman and others as defendants, it did not name Neauman Coleman as defendant.
Wooten said the creditors committee in the bankruptcy proceeding want to question Neauman Coleman about how he operated the business on behalf of Jason Coleman.
However, Neauman Coleman's attorney, Jeffrey C. Elliot of Texarkana, Texas, said Wooten wanted to question Neauman Coleman to obtain evidence in his pending civil case against Turner Grain, noting that Neauman Coleman is a defendant in several other lawsuits against Turner as well.
Elliot countered that the scope of such a deposition in a bankruptcy case would be too broad given that Neauman Coleman, Jason Coleman and Turner Grain Vice President Dale Bartlett and various businesses and people with ties to Turner Grain Merchandising have been named as defendants in multiple civil lawsuits seeking to recover payment for grain delivered to the company.
Elliot said Neauman Coleman is a commodities futures broker who does not buy or sell physical grain.
Given the conversion to a Chapter 7 bankruptcy, Keech told the judge that the new trustee might have a different view about deposing Neauman Coleman.
After a short recess, Jones denied a motion from the creditors committee to depose Neauman Coleman for the time being. She said Wooten and the committee may refile it later in the bankruptcy process.
Business on 05/15/2015