Keystone Agricultural Producers (KAP) is hosting a meeting Dec. 3 to try and clarify where grain farmers owed money by Niverville-based Puratone stand.
“We’re not going to be threatening people or making statements of claim,” KAP president Doug Chorney said in an interview Nov. 26. “We really just want to get the facts out because so far members are telling me they’re getting their information through the media and through Deloitte, the monitor, but they are limited in what they know about what’s really going on.”
Meanwhile, some Puratone farmer-creditors are exploring the possibility of a lawsuit against Puratone directors to try and recoup the estimated $900,000 grain farmers are owed in total.
Puratone, which operates about 50 hog barns in Manitoba and three feed mills, filed for creditor protection Sept. 12, owing creditors around $100 million, including $86 million to three banks, which are secured creditors. Deloitte was appointed to monitor the process.
Nov. 1, Maple Leaf Foods announced it had entered into an agreement to purchase Puratone for $42 million.
Some farmer-creditors have said Maple Leaf should demonstrate it’s a good corporate citizen by paying farmers owed money for grain delivered to Puratone. Maple Leaf disagrees.
“Maple Leaf is purchasing the assets of Puratone, which does not represent liabilities held by the company,” Maple Leaf spokesman Dave Bauer said in an interview from Toronto Nov. 8. “The courts will supervise how those debts are settled…”
Officials from Puratone, Maple Leaf, Deloitte, the lenders (Farm Credit Canada, Bank of Montreal and the Manitoba Agricultural Services Corporation), the Manitoba Pork Council and the Animal Nutrition Association of Canada, which represents feed mills, are attending the meeting, Chorney said.
Kyle Foster, an Arborg farmer, a KAP executive member and a Puratone creditor, will represent farmers owed money by Puratone.
Chorney said he doesn’t want to give farmers false hope.
“But No. 1 we’re going to try to (get farmers their money) and No. 2 we’re going to try and make sure this doesn’t happen again through some kind of payments security program,” he said.
Currently only grain companies licensed by the Canadian Grain Commission are required to post security to cover what’s owed to farmers when they deliver to a licensed facility any of the 21 grains and oilseeds listed under the Canada Grain Act. Feed mills are not covered by the CGC’s security program. Neither are farmer-to-farmer grain sales.
When companies declare bankruptcy the rules around creditors are relatively straightforward. Any funds earned from the sale of the firm’s assets first go to secured creditors.
Under Section 81.2 of the Bankruptcy and Insolvency Act farmers go to the top of the creditors’ list if they’ve delivered products within 15 days of the firm going bankrupt. But that presumably doesn’t apply here because Puratone sought credit protection, found a buyer and never declared bankruptcy.