Monette Farms seeks court protection extension until June 19
REGINA — The stay of proceedings allowing Monette Farms to operate under court protection will likely be extended to June 19.
According to the most recent public court documents, the company would also get access to another $50 million in debtor-in-possession financing to ease its cash flow woes. The first application placing the group under the Companies’ Creditors Arrangement Act authorized $40 million.
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FTI Consulting, the court-appointed monitor, has filed its first report and requested the extension once the initial stay expires May 1.
The Monette companies entered protection April 21.
Why it Matters: The Monette group includes 18 companies and three limited partnerships that operate on owned and leased land in Alberta, British Columbia, Saskatchewan, Manitoba, Arizona, Montana and Colorado. Although often described as Saskatchewan-based, since it began as Darrel Monette’s family farm there in 1912, Monette is now headquartered in Airdrie, Alta., and is one of the largest privately held farms in North America.
FTI also applied for sale approval and a vesting order for Monette’s Hafford, Sask., farm property for $28.7 million. The sale to G and K Walter Farms and Harvest Ltd. of Magrath, Alta., was in the works before the CCAA process began and as such requires court approval.
The report notes the $40 million in DIP financing was not granted until April 24 and on terms different than originally expected.
The DIP lenders, a syndicate led by Scotiabank, would not accept the terms and could not provide money until they and Monette signed a waiver agreement.
“The waiver required the initial advance to be ‘ring-fenced’ in Canada, so no inter-company transfers have been allowed to occur from the initial advance pending recognition of the ARIO by the U.S. Bankruptcy Court,” the report said.
ARIO stands for amended and restated initial order.
The U.S. Bankruptcy Court has recognized the Canadian order and scheduled a hearing for May 14.
Cash flow statements in the report said Monette will have a net cash loss from operations of $73.1 million, on receipts of $28.5 million and costs of about $106.6 million, between April 18 and June 19.
By July 17, the cash loss would be $60.7 million on receipts of $61.7 million and costs of $122.4 million.
Costs include crop inputs, interest to its lenders and restructuring costs.
The monitor said this indicates the need for the full $90 million in DIP financing and should get the companies through restructuring.
It said Monette has paid down some of its cattle loan from Farm Credit Canada and has an outstanding balance of $4.7 million.
Source: producer.com