Alberta-based Sunterra companies in financial, legal trouble
Glacier FarmMedia — Alberta-based Sunterra Farms has filed notice for protection under federal bankruptcy and insolvency laws to restructure itself financially while three of its U.S. subsidiaries face mounting legal and financial woes.
According to publicly posted documents, Sunterra Farms Ltd., Sunterra Food Corp., Sunterra Quality Food Markets Inc., Sunwold Farms Ltd. and Trochu Meat Processors all filed notice to creditors on March 24.
“Please be advised that the company is not bankrupt and has availed itself to a procedure whereby an insolvent person, with creditor and court approval, restructures its financial affairs,” said the letters to the creditors.
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Led by brothers Ray, David and Glen Price, the company that got its start in hog breeding business in 1970 later expanded into meat processing and then into food processing and retail.
Financial troubles
Harris & Partners of Calgary is the proposed trustee and is to monitor cash flow during restructuring, help develop the proposal and liaise with creditors.
Under the federal law an automatic stay of proceedings is in effect; creditors can not begin any actions against the companies.
The companies have 30 days to file their proposals, unless they get exemptions for longer periods.
The documents show liabilities of $36.6 million for Sunterra Farms, $37 million for Sunterra Food Corp., $18.9 million for Sunterra Quality Food Markets, $30 million for Sunwold and $17.9 million for Trochu Meat Processors.
The documents list Canadian Western Bank as owed $17.5 million.
Legal woes
Meanwhile south of the border, three hog-feeding subsidiaries of Sunterra Enterprises — Sunwold Farms Inc., Sunterra Farms Iowa Inc., and Lariagra Farms South Inc., are named in a lawsuit, allegedly related to a cheque-kiting scheme.
Cheque-kiting is a term used to describe a scheme in which cheques are knowingly written on an account that has insufficient funds and covered with cheques drawn on another account that also has insufficient funds to delay default on payments owed.
None of the allegations have been proven in court. Statements of defence have not been filed.
Compeer Financial filed suit in South Dakota last week asking the court to appoint a receiver to oversee the finishing of 110,000 hogs and compensation for “billions” of dollars fraudulently transferred by the defendants.
The judge agreed and appointed Pipestone Management II, LLC.
Court documents from South Dakota note that Sunterra is a hog management company that managed 500,000 pig spaces for Sunwold, Lariagra and others. Sunwold and Lariagra are both wean-to-finish operations.
The documents stated that in October the three companies received a total of $11.5 million in lines of credit from Compeer, a member of the Farm Credit System. These lines were secured by various property, including the 110,000 pigs.
In February, the documents said, Compeer’s in-house counsel learned of activity in the defendants’ accounts, such as writing multiple cheques each day and sending them through next-day mail to be deposited into an account with National Bank of Canada, previously Canadian Western Bank. They were also allegedly sending Compeer multiple cheques each day drawn against that account.
“In other words, defendants were sending nearly identical amounts and numbers of (cheques) back and forth between CWB and Compeer daily,” said the court documents.
“Between Jan. 1, 2025 and Feb. 10, 2025 alone, defendants allegedly issued 474 (cheques) out of their Compeer accounts (for deposit with CWB) for a total of $431,301,200, while during that same time they deposited 472 (cheques) into their Compeer accounts (out of CWB) for a total of $432,359,712.35.”
The documents say that after telephone calls between Compeer and Sunterra’s CEO Ray Price, the situation was not resolved. Compeer said its review found that as a result of the activity, it is now owed more than $35 million even though the line of credit it had approved was only for $11.5 million. Collateral was valued at just more than $19 million.
On March 26, The Pork Group Inc. and Tyson Fresh Meats Inc. intervened, saying they were concerned about the well being and care of the hogs included in the security agreements and another 300,000 hogs.
Although defence counsel argued Compeer could have kept the money flowing to help pay bills and protect its interest, the court said that was untenable.
United States district judge Eric Schulte heard the matter March 27 and issued his written decision the next day. Pipestone is responsible for the care of the pigs.
Source: Farmtario.com