Saskatchewan growers who supplied a dry mustard milling firm in the province’s southwest will get what they’re owed, while the company’s fate is to be decided by the end of next week.
The Canadian Grain Commission announced April 23 that growers who delivered to Mustard Capital Inc. (MCI) at Gravelbourg, Sask., up until the end of October 2011 will get full compensation through the CGC’s payment protection program.
The company, which had been in the process of expanding its business through a second facility at Vanguard, Sask., was a CGC-licensed grain dealer up until Feb. 1, 2012.
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According to CGC chief commissioner Elwin Hermanson, growers who hadn’t been paid for deliveries 90 days before MCI lost its licence are eligible to submit claims for compensation.
MCI announced Feb. 2 it would seek financial reorganization and debt restructuring. At the time it cited a “combination of expansion cost overruns and operational losses from delayed development” of the site at Vanguard, about 55 km west of Gravelbourg.
The company said it would continue business as usual in the meantime, providing security to farmers either by dealing with another CGC licensee or by paying cash for purchases.
According to an April 5 affidavit from company CEO Tom Halpenny, MCI got $250,000 in court-approved interim financing in February from one of its customers, Granosa AG — and since then operated at a profit.
He said MCI expects to be able to pay back the Granosa financing in full by the end of this month.
However, since February, MCI hasn’t come up with “any reasonable offers” from any interested party to buy, restructure or recapitalize the business, and the prospects of a new proposal for its creditors “have grown more remote.”
MCI was granted approval of an extension that will allow it to continue operating until May 4.
In that time, MCI expects to collect on outstanding accounts, fulfil contracts and convert inventory, give its employees appropriate notice and allow for “orderly and cost-effective” sale of its assets after that date if no other offers are brought forward.
However, the extension order, granted by a Queen’s Bench judge in Saskatoon, allows the Bank of Nova Scotia, one of MCI’s creditors, to apply to the same court for appointment of a receiver as of April 23.
