Sunterra companies seek creditor protection
REGINA — Several companies associated with Sunterra Group obtained protection under the Companies’ Creditors Arrangement Act in an Alberta court last month.
Another hearing was scheduled for April 28 to hear arguments regarding relief granted in the initial April 22 order, according to publicly posted documents. The applicants requested an extension to the stay of proceedings under the CCAA to July 31.
Initially, five of the companies had filed notice of intention to make a proposal under federal bankruptcy and insolvency legislation, but have since moved for CCAA protection.
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The Court of King’s Bench appointed FTI Consulting Canada as the monitor for Sunterra Food Corp., Trochu Meat Processors Ltd., Sunterra Quality Food Markets Inc., Sunterra Farms Ltd., Sunwold Farms Ltd., Sunterra Beef Ltd., Lariagra Farms Ltd., Sunterra Farm Enterprises Ltd. and Sunterra Enterprises Inc.
Three companies that operate in the United States are also involved in a court case in South Dakota, where Compeer Financial began proceedings against them in March, alleging an outstanding loan balance of US$35.3 million against collateral of $19 million. Compeer has alleged the Sunterra companies undertook a cheque-kiting scheme. This happens when companies write cheques from one account to another, even though neither contains enough money.
In court, Compeer asked for a receiver to look after 110,000 hogs, which serve as collateral, and compensation for “billions of dollars fraudulently transferred by the defendants and their principals between Canada and the United States.”
The court approved the request for a receiver, and Pipestone Management is serving as such.
Sunwold, Sunterra Farms Iowa and Lariagra Farms South filed a counterclaim April 11 denying criminal allegations from Compeer, according to U.S. court documents.
The counterclaim said Compeer knew the companies were having cash flow issues and helped the farms move money around.
“The transfers that Compeer now characterizes as alleged “cheque kiting” have gone on for years with Compeer’s knowledge and assistance,” the document said.
Compeer asked the court to dismiss the counterclaim, saying the defendants’ “vague allegations attempting to blame their lenders for (their) own misconduct are wholly implausible.”
Sunterra Group is owned by the Price family of Acme, Alta., and has been in business for more than 50 years.
The financial difficulties in both countries came to light in February, according to an affidavit from Arthur Price, when Compeer began asking about “a number of high-value USD cheques” moving daily between Sunterra’s U.S. hog companies and their Canadian companies.
Compeer froze all cheques coming from the U.S. companies, and as a result, the Canadian hog farm accounts went above the approved borrowing limit, the affidavit said.
National Bank of Canada (NBC), Sunterra’s Canadian lender, then began freezing cheques and accounts. The affidavit said that blocked payments of payroll and benefits, feed and other essential supplies.
“These actions damage not only the interest of the applicants themselves, but also of their employees, suppliers and FCC as lender and holder of security over Sunterra, Sunwold and Lariagra Farms (whose value is maintained by their continued use for hog farming),” the document said.
“The NBC freezing actions have also endangered the health and safety of the sows and piglets on the Canadian hog farms in relation to blocked supplies to those farms.”
NBC retained FTI Consulting in mid-February to investigate and Sunterra co-operated, the affidavit said.
The affidavit said NBC continues to freeze cheques to essential suppliers, such as dairy and bakery ingredient suppliers for Sunterra markets, and that harms the business. It said this has continued even though there were sufficient funds in Sunterra accounts to cover the cheques.
In mid-March, NBC filed in court seeking repayment of its loan and an interim receiver to investigate the alleged cheque issues. The court dismissed that application.
According to the affidavit, the companies owe $17.5 million to NBC and $17.8 million to Farm Credit Canada. Trade creditors are owed about $3.2 million.
Secured assets and collateral for the two, as of Dec. 31. 2024, were listed at $79 million.
Contact karen.briere@producer.com
Source: producer.com