Previously, CHICK-NEWS reported on the Chapter 11 petition filed by the company in the U.S. Bankruptcy Court for the District of Minnesota. Pure Prairie Poultry claims assets of between $50 and $100 million but has liabilities between $100 and $500 million with numerous creditors.
The Court rejected the Chapter 11 bankruptcy petition since it was dependent on Sandton Capital providing debtor financing amounting to $15 million but with the lender, receiving secured status placing them above other creditors. Objections to the restructuring plan led to the rejection by the Court and Pure Prairie Poultry must now either find a buyer or cease operation under Chapter 8.
The U.S. Department of Agriculture is a creditor based on $37.6 million provided through a guaranteed-loan program. Due to financial restraints, Pure Prairie Poultry was unable to pay for feed for flocks held for 14 growers in Iowa. Accordingly, the Iowa Department of Agriculture and Land Stewardship exercised emergency authority to acquire 1.3 million broiler chickens that required feed. This action was taken under Iowa Code Chapter 717 and was approved by a state court on October 2nd. The Department of Agriculture is cooperating with farmers to maintain flocks to market weight at which time they will be sold, and taxpayer funds will be reimbursed with the state representing a debtors entitled to proceeds of any income from disposal of assets or sale of the enterprise with a plant in Charles City, IA.
In principle, Pure Prairie Poultry should not have found itself in a position to file for bankruptcy protection. Other small-scale broiler producers supplying niche markets have survived and expanded. It is evident that the Company was undercapitalized in relation to projected volume. Their product carried claims of “all natural,” raised under acceptable welfare standards without antibiotics and fed vegetable-based diets. This should have allowed the Company to establish an acceptable share of the high-value market. Other benefits included the initial support of the USDA and other lenders and the availability of contract growers. Obviously, Management erred in execution, despite their collective ‘pedigree’ including Foster Farms, Tyson Foods, Petaluma Poultry, GNP Company and Zacky Farms.