The trustee in the bankruptcy of defunct vegetable giant Allens Inc. has filed court documents contending that multiple entities involved in the initial sale of the company made arrangements that left the estate's coffers empty.
Trustee Ray Fulmer said in an interview Tuesday he has questions concerning the sale three years ago of Siloam Springs-based Allens to Sager Creek Vegetable Co. Fulmer said those involved in purchasing Allens, through intentional actions or lack of candor with the court, significantly affected the value of the estate and its ability to pay back creditors.
An adversary complaint filed with the U.S. Bankruptcy Court for the Western District of Arkansas late last week targets multiple parties including Sager Creek Vegetable Co. along with the investment funds that owned the company; several of Allens' financial advisers; and some of Allens' suppliers.
The filing contends that the parties' actions, during the auction of the company, breached their legal duties to the court and to the debtor. Fulmer contends the defendants engaged in a fraudulent transfer, divesting the estate of at the least $74 million in avoidance actions and up to $32.9 million in real and personal property.
Professor Tim Tarvin of the University of Arkansas School of Law in Fayetteville, who teaches bankruptcy and nonprofit law, said a bankruptcy trustee can ask the court to undo certain deals to get property or other assets back for creditors. These moves are called clawbacks.
Allens, which had been in operation since 1926, filed for Chapter 11 bankruptcy protection in October 2013. At the time, Allens owed its primary lenders $114.36 million and its secondary lenders $65.6 million, according to documents.
Sager Creek Acquisition Corp., owned by investment funds Sankaty Advisors LLC and GB Credit Partners LLC, two of Allens former creditors, bought Allens at auction in February 2014 with a winning bid of $123.8 million. At the time, the total value of the Allens sale, along with debt and other considerations, was just shy of $160 million, according to court filings.
According to transcripts of the auction, McCall Farms Inc., a South Carolina-based canned and frozen vegetable company, placed a bid of $119.2 million, and New York-based Seneca Foods' bid came in at $117 million.
Seneca initially made an offer of $148 million to buy Allens, but the amount was subject to fluctuations in the perceived value of the company. Allens considered a merger with Seneca in September 2011, but the deal was abandoned.
Allens Inc. was renamed Sager Creek Vegetable Co. in July 2014. The bankruptcy has since been shifted to Chapter 7. The Allens estate was left effectively penniless after the company's sale, according to Fulmer.
In March 2015, Del Monte Foods Inc. bought all the assets of Sager Creek Vegetable Co. for $75 million in cash. The Sager Creek Vegetable Co. owned by Del Monte Foods is not part of Fulmer's suit.
Prior to the deal, court documents indicated that Sager Creek has been facing cash-flow problems and was exploring its options, including a possible sale.
Business on 03/02/2016