White Oak tops bidding for Northern Beef Packers

Published on: Dec 5, 2013

WITH a bid of $44.35 million in cash and credit, White Oak Global Advisors won the auction for defunct Northern Beef Packers in U.S. Bankruptcy Court Dec. 5. One of only two bidders, the private capital firm essentially bought the plant from itself, as it stood first in line as a principle creditor of the shuttered South Dakota slaughter facility.

White Oak’s bid, for the most part, was an effort to make itself whole. The company offered Northern Beef at $35 million line of credit around the time the failed packer started processing cattle in September 2012.

Of the total bid, the Aberdeen News reported that $39.5 million was credit, roughly corresponding to the principle and interest the firm said Northern Beef owed on its loan. Additionally, up to $3.3 million was appropriated to settle contractor liens, including a multi-million dollar claim from Olson Digging, a local firm that did most of the site preparation in 2007, and sued last year for more than $2 million in unpaid bills.

Additionally, more than $1 million will be paid to Brown County for back property taxes, and as much as $400,000 will be paid to Lincoln Capital for its services in handling the disposition of Northern Beef after it announced bankruptcy in July.

The Court had set the minimum bid at $12.75 million, far less than the nearly $50 million court filings indicated the company owed its creditors. Green Bay, Wisc., packer American Foods Group offered the minimum bid, but proffered no counter when White Oak stepped up with its bid; no other party filed as a qualified bidder for the court-mandated auction.

Northern Beef filed for Chapter 11 protection in the U.S. Bankruptcy Court for the District of South Dakota on July 19 and laid off all but a handful of workers. In a statement, the embattled company said the Chapter 11 protection was needed to provide additional time and interim working capital so NBP could complete its restructuring initiatives.

The company said at the time that it had negotiated a debtor-in-possession financing facility with a group of secured lenders and other interested parties, but when that financing fell through, operations at the plant ceased, and the search for new ownership commenced.

Given the complexity of the company’s finances, the Court may have quite a bit of work ahead before finally settling the case. In addition to White Oak’s claim, as many as 120 Korean and Chinese investors sank $500,000 each into the plant under the federal EB-5 program, which provides a visa to foreign citizens, or “immigrant investors,” backing U.S. companies.

It is also somewhat unclear as to what other private investors might be out there hoping to recoup losses from their stake in the plant. In filings and hearings earlier this month, for example, it was revealed that a Cayman Islands shell company facilitated a $30 million financing facility for the plant in 2010, but Northern Beef used $35 million obtained from 70 Chinese investors under the EB-5 program to purchase the financing company and its loan at more favorable interest rates.