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Published June 30, 2010, 08:03 AM

Banking panel clears way for $30M loan to Northern Beef

PIERRE — The South Dakota Banking Commission decided Tuesday that a small group of secret investors doesn’t need a state lending license to make a short-term $30 million construction loan to Northern Beef Packers to complete and start operating a new plant at Aberdeen.
The loan was described during the 15-minute hearing as the last major piece in reviving the stalled project, which is a key component in Gov. Mike Rounds’ South Dakota Certified program for raising, butchering and marketing quality beef that can be specifically tracked from the pasture to the feed lot to the table.

By: Bob Mercer, Republic Capitol Bureau

PIERRE — The South Dakota Banking Commission decided Tuesday that a small group of secret investors doesn’t need a state lending license to make a short-term $30 million construction loan to Northern Beef Packers to complete and start operating a new plant at Aberdeen.

The loan was described during the 15-minute hearing as the last major piece in reviving the stalled project, which is a key component in Gov. Mike Rounds’ South Dakota Certified program for raising, butchering and marketing quality beef that can be specifically tracked from the pasture to the feed lot to the table.

The Northern Beef project began in 2005. The empty building, started by Aberdeen livestock marketer Dennis Hellwig, now has many liens and other claims against it. Hellwig and the original investors have been unable to attract enough conventional financing to get the plant finished and open.

The hearing Tuesday provided additional insight into who’s providing the $30 million loan, which is due in 2013 or sooner. An affidavit filed for Wai Yee Christine Ma, a resident of Hong Kong, China, outlined the financial chain.

She is a director of Anvil Asia Partners, a Cayman Islandsincorporated company. Anvil Asia manages Pine Street Special Opportunity Fund I, also incorporated in the Cayman Island.

The actual lender of the $30 million is Epoch Star Limited, a special purpose entity incorporated in the British Virgin Islands and wholly owned by Pine Street.

She said Pine Street has less than 10 investors; and none of Anvil, Pine Street or Epoch is a related party to Northern Beef, or is a bank, or is regularly engaged in the business of lending money.

In her affidavit, she said her understanding is that Asian investors participating through the U.S. government’s EB-5 program provided part of the original funding for the project. EB-5 visas are available to foreign nationals who invest $500,000 in certain types of projects.

“It is further my understanding that for many reasons construction of the plant has stopped, the project is a financial failure, the benefits and status of the original EB-5 investors is in some jeopardy, many liens have been filed on the project and NBP does not have the financial wherewithal to complete the project, absent a multiplicity of financial arrangements of which Epoch’s participation is part.

“It is my further understanding that a second ‘wave’ of EB-5 investors has been obtained, and a number of other incentives and financial vehicles have been assembled, some involving the state of South Dakota,” she continued. “In any event, none of these financial sources provides the necessary funding to complete construction of NBP’s plant and to get it operational. It is estimated that approximately $30 million will be needed for that purpose.”

She said Epoch was formed solely as “an ad hoc and diverse structure” for making the $30 million loan. That, combined with the urgency of Northern Beef’s needs and “apparent inability” to find traditional financing, would “as a practical matter end” the hopes of Northern Beef and the EB-5 investors’ group to complete the project if Epoch was required to go through a state licensing process, she said.

Sioux Falls lawyer Steve Sanford represented Epoch before the Banking Commission. He explained that Epoch sought the declaratory ruling because the participants wanted assurance that a state lending license wasn’t necessary.

The request for a declaratory ruling from the commission was received June 11 by the state Division of Banking. Asked why a decision by division director Roger Novotny wasn’t sufficient, Sanford replied: “Because so much was at stake.”

He said the commission has clear authority under state law that supersedes the director’s power to make administrative decisions. “I don’t think I’m paranoid. In this instance, I’m trying to be extremely careful,” Sanford said

Aberdeen lawyer Rory King represented Northern Beef at the hearing. “This is the last condition of an imposing checklist to be fulfilled,” he told the commissioners. He said nearly all lien-holders have consented to payment-schedule agreements.

The Rounds administration was represented by one of the governor’s Cabinet members, Secretary of Tourism and State Development Richard Benda. “We look forward to a favorable decision today so we can move the project forward,” he testified.

The commission’s vote was 4-0 finding that a state license was unnecessary. “That’s as firm as we can get, Steve,” Commissioner John Lillibridge of Burke said.

Replied Sanford, “I think we need to be grateful we live in a state where we can get this kind of thing done with dispatch.”

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