Trail of transactions
REDFIELD, S.D. -- Officials of Anderson Seed Co. of Mentor, Minn., still aren't answering phones, but some farmers and their lawyers are watching a string of transactions by owners, lenders and new buyers, orchestrated by a St. Cloud, Minn., law firm, hoping they won't leave less money for unpaid sunflower deliveries.
Legumex Walker Inc. of Winnipeg, Manitoba, through a new mortgage, has made itself a secured creditor in the company's Redfield, S.D., sunflower processing plant. Sunflowers and sunflower products in that plant are not available to farmers, officials say.
The Redfield plant specifically was not included in an earlier $19 million deal, announced Feb. 15, in which Legumex bought the company's other assets in North Dakota and Minnesota. LWI's new $2.6 million mortgage deal at Redfield was signed Feb. 14. The facility also secures up to $11 million in debts held by US Bank.
Records at the Spink County, S.D., courthouse show a "quit claim deed" on the 10-acre facility was acquired by a new company called BinCo Holdings LLC, which is located at the same address as Anderson Seed's law firm in St. Cloud, Minn. It is unclear whether Ron Anderson, owner of Anderson Seed Co. Inc., has any ongoing business arrangements with Legumex. Anderson's phone number at Mentor, Minn., is no longer listed.
On Feb. 15, LWI announced it had purchased some assets of Anderson Seed ($4.8 million) and the larger St. Hilaire Seed Co. Inc. ($12 million, plus $6 million in capital and long-term debts). The Canadian-based company, formed in July and registered on Feb. 1 to do business in Minnesota in three forms -- Legumex Walker USA Inc., Legumex Walker Finance Inc., and Legumex Walker Sunflower LLC.
On Feb. 17, the South Dakota Public Utilities Commission suspended Anderson Seed's grain brokerage license at the company's new processing and handling facility in Redfield. Officials in that state say more than 40 farmers are owed more than $2.6 million in claims for sunflowers that had been delivered in late 2011. The commission will determine whether to revoke the license at its regular March 13 meeting.
On March 1, the North Dakota Public Service Commission entered documents to take over North Dakota facilities in Cass County court. Staff has tallied $1.4 million for more than 20 farmers in unpaid sunflowers at elevator locations in Durbin, N.D., in Cass County and Selz, N.D., in Pierce County.
On Feb. 23, Minnesota suspended Anderson Seed's grain brokerage license at Mentor, Minn., says Ashley Hacker, senior state program administrator for the Minnesota Department of Agriculture Fruit, Vegetable and Grain Unit. A "valid claim" against the bond came in on that date. The agency will look into it and will send the company a notice of their intent to revoke the license, after which the company would have 15 days to appeal. The agency will also publish a notice of how farmers can make claims against the bond, which is $125,000, she said.
It remains unknown exactly why LWI initially didn't buy the Redfield, S.D., processing plant that was completed in 2010. The plant was dedicated on Jan. 13, 2011, with the newly inaugurated South Dakota Gov. Dennis Daugaard in attendance.
From a document search at the Spink County (S.D.) Register of Deeds in Redfield, S.D., and other sources Agweek has learned that:
• Oct. 8, 2010 -- US Bank N.A., of Oshkosh, Wis., established an $11.11 million lien on the Redfield, facility, involving three obligations: $2.8 million in a "single pay" note for some particular unspecified reason, as well as $6 million in a revolving line of credit for operating, and a $2.2 million term note. The records don't indicate whether Anderson Seed owed anything on the $6 million line of credit.
• Feb. 7 -- Anderson officials told the SDPUC officials that "part of the explanation" for their financial problems related to farmers reneging on contracts for 2010 seeds, selling $6 million worth of seed to other buyers, forcing the company to acquire seed elsewhere to fulfill contracts with their customers. Kara Semmler, a SDPUC staff attorney who was part of the meeting, told Agweek that her agency had not yet substantiated this explanation. She says she and Jim Mehlhaff, of the SDPUC staff, asked why the company didn't sue farmer contract-holders, but there was no immediate answer. "We (at the SDPUC) are concerned about the producers who have delivered and haven't been paid," Semmler says. Those payments total some $2.6 million, so far. "Those are the people we're hoping to protect at this point," she says.
• Feb. 9 -- BinCo Holdings LLC is established at St. Cloud, Minn., according to the Minnesota Secretary of State. Its address at 1015 West St. Germain in St. Cloud is also the address for Rinke Noonan law firm and a US Bank ATM.
• Feb. 15 -- Legumex Walker Finance Inc., of Seattle, represented by Kevin R. Prohaska, of the Stoel Rives LLP law firm in Minneapolis, filed a mortgage "modification" to the US Bank loan. As of Feb. 14, Legumex had added a mortgage on the Redfield property, for $2.64 million. (Legumex Walker has a canola subsidiary in Washington, which was part of a merger in the company, and Joel Walker of Washington became the chief executive officer for the parent company.)
• Feb. 17 at 11:07 a.m., -- BinCo Holdings LLC, of St. Cloud filed paperwork in Spink County that says that on Feb. 14 it had become the new owner of the Redfield, S.D., facility in a "quit claim deed." Unlike a warranty deed, no money changes hands. The new company appears to take ownership subject to the US Bank mortgage, which had not been satisfied, according to county records.
• Feb. 17 at 1 p.m. -- The SDPUC hearing, suspended Anderson Seed's grain brokerage license in a hearing. SDPUC lawyers then said that in their interview on Feb. 7 with Ron Anderson and his daughter, Stephanie, the Andersons indicated they were looking at refinancing the company.
What of unsecureds?
Lowell Bottrell is a Fargo, N.D., lawyer whose firm is representing three North Dakota farmers who are owed money from deliveries to Anderson Seed's Durbin, N.D., location. He says the new Legumex mortgage could make the company a secured creditor in the case of default and in a position to foreclose the facility in South Dakota. He wonders if the $2.6 million will go to satisfy part of US Bank's debt. He worries that this ultimately could put farmers and other "unsecured" creditors in a worse position to collect.
North Dakota law (60-02-25.1) considers farmers unsecured "unless they can find grain left in the facility," Bottrell says. "Grain in the facility belongs to the farmers until the farmers are paid," he says. "Security interest to a lender doesn't attach to the grain inventory until all of the farmers are paid." Neither Minnesota nor South Dakota has similar laws, he says. "North Dakota's statute is unique," Bottrell says.
Farmers have been referred by Legumex and Anderson Seed to the Rinke Noonan law firm in St. Cloud.
Those farmers have only been able to leave a message and Bottrell knows of none who have been called back. Mike Gust, a lawyer in the Anderson, Bottrell, Sanden and Thompson firm in Fargo, got a call-back from Gary Leistico, the lawyer handling the sale of Anderson Seed for Rinke Noonan, who told him Anderson Seed has bonds in all three states.
"I told him we need to explore what grain is at the (North Dakota) facilities," Gust says. "He assured me that at the point of sale there was no grain in the North Dakota facility to be had. They were certain that the sale proceeds, after secured creditors were paid off, would not be sufficient to pay all (farmer) claims in North Dakota, and that they had a $280,000 bond in North Dakota that the Public Service Commission would be, at some point, handling."
Gust says one of his farmer-clients who normally delivers to Redfield, S.D., was told to deliver to Mentor, Minn., because the Redfield facility "is full, and we've got no room to accept."
Bottrell wonders whether the BinCo Holdings transaction could be a "quasi-sale" of the property. A mortgage could be done quicker than a warranty sale, if there were unseen issues holding up a warranty sale.
Bottrell says it appears that the law firms created a "composition agreement," which is, in effect, a "bankruptcy outside of the U.S. Bankruptcy Court," and handled in state court. Similar to bankruptcy, it pays off secured creditors and offers unsecured creditors what's left, usually on a percentage of full value, but without supervision of a trustee.