the column at left, then click on “FarmPure Seeds Inc.”)
Pickseed discovered the depth of FarmPure Seeds’ indebtedness during its due diligence for the purchase of the company’s forage and grass business, Kornuta said in an interview last week.
The proposal, she wrote, will allow FarmPure Seeds to be sold as “a going concern with the potential to maintain operations in Nipawin” which “provides a needed facility to forage growers within the community and the province.”
FarmPure also owned two facilities in Manitoba: a canola-processing plant at Laurier, already sold at auction, and a forage seed distribution centre at Brandon, now up for sale.
FarmPure Seeds’ former secured creditors, the Royal Bank and Farm Credit Canada, have cut a separate deal with Pickseed that’s expected to cover only about 85 per cent of the $4.1 million FarmPure owed them. Under that deal, Pickseed buys out RBC’s and FCC’s secured positions and becomes FarmPure’s only secured creditor.
Pickseed will not seek to claim any of its own unsecured portion, Kornuta said. The company plans to do business in Nipawin with many of these unsecured creditors and would prefer to at least get some of what those farmers are owed back into their hands, she said.
The Pickseed proposal must be accepted by a majority of creditors representing at least 66 per cent of the total value of proofs of claim filed with MNP, Kornuta wrote.
If the creditors don’t agree to this deal, she said, Pickseed then acts on its security and FarmPure Seeds “immediately becomes bankrupt.”
The Nipawin facility, which would be Pickseed’s first in the province, came into FarmPure’s hands when it bought Svalof Weibull’s SW Seeds division in 2006.
FarmPure’s business model involved buying seed varieties under license from agencies such as the University of Manitoba, Agriculture and Agri-Food Canada, the University of Saskatchewan’s Crop Development Centre and the University of North Dakota, then propagating and distributing seed through its retail network.
According to Kornuta’s letter, the company’s staff has dwindled from about 100 people down to the 11 who now operate the Nipawin plant.
FarmPure Seeds’ financial woes “are apparently the result of, among other things, rapid expansion without adequate market analysis and without the necessary managerial support and expertise to successfully manage a corporation with this diverse and complex an operation,” she wrote.
Based on MNP’s talks with the company’s board, advisers and lawyers, “it is apparent the board relied on their chief financial officer and other staff to operate an expanding corporation and it appears insufficient controls were in place to recognize financial difficulty in a timely fashion,” Kornuta wrote.
FarmPure Seeds, a member of Regina’s FarmPure Family of Companies, formed in the 1990s through the merger of Value Added Seeds and Performance Seeds into Quality Assured Seeds, owned by about 200 pedigreed seed growers. The company was renamed FarmPure Seeds in 2005.
FarmPure, looking to develop “profitable and sustainable value chains” for its stakeholders, formed several companies including FarmPure Foods, FarmPure Beverages, FarmPure Genetics and FarmPure Financial, while continuing to operate FarmPure Seeds. The foods, genetics and seeds businesses, each with separate boards, are the only companies still operating, Kornuta said.
The letter to creditors said FarmPure Seeds, in its draft financial statements for the period ending Oct. 31, 2007, noted having made “significant intercompany advances” to its parent firm for investment in “affiliated companies” in the development stage.
In that statement “it was also identified that the corporation needed additional financing or recovery of intercompany loans in order to meet financial obligations.”
The loans to the parent firm and affiliates are considered “uncollectible,” she wrote. The affiliated companies “had not developed sufficient sources of operating cash flow to indicate that they would be in a position to repay the amounts owing” to FarmPure [email protected]