Northern Beef Packers announced today that it has filed a voluntary petition for Chapter 11 business reorganization in the U.S. Bankruptcy Court for the District of South Dakota.
The business reorganization is intended to provide additional time and interim working capital to allow Northern Beef to complete its restructuring initiatives. To facilitate this, the company has negotiated a debtor-in-possession (DIP) financing facility with a group of secured lenders and other interested parties. Once approved by the court, the DIP financing, along with cash generated from any ongoing business operations will be used to pay operating expenses.
David Palmer, CEO of Northern Beef said, “For the last several months we have been working to secure a strategic equity investment to move our business into the next phase of production. Due to the size and importance of this investment, the process is taking longer than what was originally expected. At the same time, the beef packing industry has been experiencing some of its worst processing margins in recent decades, causing expected start-up costs to be much higher than anticipated. This has significantly reduced our cash position and is preventing us from meeting our current obligations.”
Mr. Palmer goes on to say, “Today, the company is taking a significant step towards remedying this situation and we expect the DIP financing will allow us to accomplish our restructuring goals.”
The Northern Beef Packers plant in Aberdeen, S.D., was delayed for several years as the company struggled to secure financing for the project. Earlier this year, more than 100 employees were laid off in what the company said was a temporary measure. Last week, the company announced that it was delaying issuing paychecks to its remaining employees until this week. It issued a release last week which read in part, “Due to ongoing delays with securing additional funding, Northern Beef Packers has notified its employees that payroll will be delayed this week. The company is making every effort to rectify the situation as quickly as possible.”
Sources: Northern Beef Packers, Minneapolis Star-Tribune