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Sam Kane Beef Processors – Court Approves Bidding Procedure and Schedules Auction for February 6, 2019

January 30, 2019 – Responding to the Debtors’ emergency motion of January 29, 2019 [Docket No. 49], the Court issued an order [Docket No. 64] (i) approving auction and bidding procedures, (ii) scheduling an auction and sale hearing and (ii) authorizing the abandonment of any assets not otherwise sold at the auction. Time is clearly of the essence as the Debtors have made clear from the filing of their Chapter 11 Petition and the Court establishes a very tight timetable for both the Debtors and any prospective bidders; with the Debtors obliged to take the steps necessary to make all existing and potential stakeholders aware of this timetable within one business day of the entry of the order. 
The Debtors emergency motion notes that negotiations with a prospective going concern stalking horse bidder had fallen through (the parties not sufficiently advanced in negotiations as at the January 23rd Petition to name the prospective stalking horse bidder) and stresses the need (i) to press ahead with an aggressive auction timetable and (ii) to make the Debtors assets available on a non-going concern, lot-by-lot basis (see, the list of lots, below). The motion noted, “Since the filing, and as result of circumstances well beyond the Debtor’s control, the Debtor has determined that moving forward with its previously identified stalking horse purchaser is not practicable.   Nevertheless, during the months leading up to the Petition Date, the Debtor, with the advice and aid of its investment banker, Gordian, conducted an extensive marketing and sale process related to the Debtor’s assets.  While the Debtor’s primary focus in those efforts was to sell the Debtor’s assets as a going concern, the Gordian process also attracted alternative bidders. As a result of the extensive progress and momentum that the Gordian team has developed, the Debtor believes in its business judgment that maximum value for the estate’s assets may be obtained at this time by moving for a quick auction of the estate’s assets.”
In a declaration in support of the Chapter 11 filing [the “Declaration,” Docket No. 3], the Company had noted an advanced marketing process and considerable interest from potential purchasers, including more than one then existing bid. The Declaration noted, “As a result of the efforts, the Debtor has received certain bids for the purchase of the Debtor’s assets. The Debtor, with the aid of counsel and Gordian, is in the process of selecting a lead bidder and negotiating definitive documentation for a stalking horse transaction.” 
The Debtors’ motion for emergency relief provided further detail as to the prospects for an auction, “Upon being retained by the Receiver, Gordian identified and contacted approximately one hundred twenty-one (121) potential bidders. Seventy-seven (77) of those parties responded and, subsequently, received additional information and were invited to enter into non-disclosure agreements (‘NDA’). Thirty-one (31) parties executed an NDA and were provided confidential information, and seven (7) parties submitted a total of eight (8) letters of intent (“LOI”) within the Debtor’s established bid-deadline January 14, 2019 (‘Bid Deadline’). All parties submitting LOI have continued to express interest in purchasing all or some of the Debtor’s assets. In addition, Gordian and the Debtor have continued to receive inquiries regarding the availability of the Debtor’s assets. These inquiring parties include parties that previously conducted due diligence but declined to submit LOI and additional parties learning of the Debtor since or as a result of the filing. As such, Gordian has advised the Debtor that, in its professional opinion, an auction of substantially all of the Debtor’s assets would likely result in a better outcome for the estate’s creditors than an immediate conversion to Chapter 7.”
 Key provisions of the Court’s present bidding procedures order include:
  • Any party asserting an interest in the Assets that intends to credit bid must file a Notice of Intent to Credit Bid not later February 1, 2019 (a “Credit Bid Notice”), with any objections due to a proposed credit bid due by February 4, 2019
  • Lender Rabo Agrifinance, Inc. (“Rabo”) has agreed not to transfer its loan and security document to a third party prior to the Auction. Rabo, to which the Debtors owe $12mn in respect of s secured loan, shall submit its credit bid by the Bid Deadline. Rabo shall not otherwise participate in the auction as a Qualified Bidder. Rabo shall, however, be allowed to attend the auction and consult with the Debtor as a secured creditor.
  • Only Qualified Bidders may participate in the bidding process. To become a Qualified Bidder, a potential bidder must submit a Qualified Bid by February 4, 2019 which must include a deposit the greater $250,000 or 10% of Purchase Price Value of those assets identified by the bidder in an escrow account and otherwise prove the ability to consummate the purchase of auctioned assets.
  • The auction for the assets will be conducted on February 6, 2019, commencing at 9:30 a.m. Central Time in Courtroom 400, 515 Rusk, Houston, TX 77002. Only Qualified Bidders may participate in the auction. The Debtor may conduct the auction by any grouping of assets, in any order, that it deems appropriate. Minimum overbid increments at the auction shall be in the amount of not less than $25,000.00.
  • All due diligence must be completed before the Bid Deadline.  No condition(s) allowing or regarding further due diligence will be accepted or authorized after the Bid Deadline. 
  • All Potential Purchasers will be provided with a term sheet to be submitted for purposes of submitting their bid. The draft term sheet will specify the different lots of assets to be bid on. The lots include:
  1. Lot 1: All assets of the debtor, excluding cash.
  2. Lot 2: PP&E and other assets necessary to operate the plant as a going concern.
  3. Lot 3a: Inventory
  4. Lot3b: Accounts Receivable
  5. Lot 4: Machinery and equipment 
  6. Lot 5: Land and building
Key Dates:
  • Credit Bid Notice: February 1, 2019
  • Bid Deadline: February 4, 2019
  • Auction: February 6, 2019

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The post Sam Kane Beef Processors – Court Approves Bidding Procedure and Schedules Auction for February 6, 2019 appeared first on Daily Bankrupt Company Updates | Bankrupt Company News.

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