Pipeline Foods enters bankruptcy protection

October 2021 | DEALFRONT | BANKRUPTCY & CORPORATE RESTRUCTURING

Financier Worldwide Magazine

October 2021 Issue

Supply chain solutions company Pipeline Foods filed for Chapter 11 bankruptcy protection in July at the US Bankruptcy Court for the District of Delaware.

Pipeline was formed in 2017 by AMERRA Capital Management LLC, which deploys debt and equity capital globally to upstream and midstream food and agribusinesses.

Going forward, Pipeline estimates that funds will be available for distribution to unsecured creditors. The company estimated 200 to 999 creditors and both assets and debts of $100m to $500m.

The bankruptcy filing lists just the company’s 20 top creditors which are owed an estimated $20.7m. US creditors on the list are from Minnesota, North Dakota, Wisconsin, Nebraska, Ohio, Indiana and Michigan, as well as companies in Dubai, India and China. Topping the list is Simmons Feed & Supply LLC of Salem, Ohio with $5.2m in customer advances, Agri Exim DMCC of Dubai with $2.6m in trade debt, and Jim Wolf with $2.2m in what the company described as a “disputed” note payable.

Pipeline has won the approval of the bankruptcy court to continue to pay employee wages and benefits without interruption and use its cash collateral. The company said it expected to seek approval to sell its grain inventory outside of the ordinary course at market prices to facilitate this process. While the size of the bankruptcy is not fully known, Pipeline’s proposed sale of its grain inventories is expected to generate sales of around $28.7m. In addition, the company expects to collect $12.7m from accounts receivable, for a total of $41.5m in revenue. Deducting expenses, it proposes to pay $26.9m to secured creditors through weekly ‘sweeps’ of the cash receipts. AMERRA is believed to have invested around $50m in the company.

“The impact of the coronavirus (COVID-19) pandemic coupled with the company’s secured debt obligations have caused significant financial distress on our business,” said Anthony Sepich, chief executive of Pipeline Foods. “As a result, we believe that a bankruptcy filing and a potential sale of the business, portions of the business, and certain of its assets is the best path forward to unlock value for the benefit of all creditors. I would like to thank all of our employees, growers, customers and business partners for their dedication and continued support through these unprecedented times.”

Pipeline was known in organic trade groups for its efforts to ensure that products labelled ‘organic’ had been certified properly and were not counterfeit or fake organics. In late June 2021, the Organic Trade Association mentioned Pipeline’s support of the trade organisation’s “ground-breaking fraud prevention program” — Organic Fraud Prevention Solutions.

The past few years have been a period of significant growth for Pipeline. The company has completed several notable mergers, including the 2019 acquisitions of the ancient grains and specialty products business of Organic Ventures and the specialty and organic soy and corn business of SunOpta Inc. In 2018, Pipeline also acquired a 3.4 million-bu grain elevator in Atlantic, Iowa, from ADM. The company has been focused on North America and Pacific Rim countries.

According to the company’s 14 July bankruptcy hearing, Pipeline officials said they were exploring bankruptcy with the US Bankruptcy and US Trustee’s offices in Delaware as early as May 2021.

A federal judge in Pipeline’s bankruptcy has allowed Minnesota farmer creditors to be free to sell grain that had been pledged to the company in credit sale contracts to other buyers. The ruling on 30 July 2021 allows farmer-creditors of the company a measure of cash flow and financial relief for some farmers — but only the Minnesotans. Also, state grain regulators in Minnesota, Iowa and Michigan asked that the company not be allowed to sell grain inventories to pay off secured creditors.

Pipeline Foods is represented in the bankruptcy by Saul Ewing Arnstein & Lehr, LLP with Michael Gesas as lead counsel. Pipeline’s financial adviser is SierraConstellation Partners. The chief restructuring officer is Winston Mar of SierraConstellation Partners. The claims agent is Stretto.

Richard Summerfield