GRAND FORKS, N.D. - The first meeting for creditors in the McM Inc. farm bankruptcy on March 16 drew a handful of lawyers from some of the major creditors and no individual farm landowners.
The St. Thomas, N.D., area farm filed for Chapter 7 liquidation bankruptcy on Feb. 10, 2017, later listing $49.7 million in debts and $10.3 million in assets. The high-value crop farm had reached a peak of 59,000 acres in 2012 and scaled back to 39,000 acres in 2016, focusing primarily on red potatoes, dry edible beans and sugar beets.
This was the first opportunity for creditors to ask questions of McM Inc. and its owner, Ron McMartin Jr. A list of creditors and amounts was published on March 10, including more than 200 unsecured creditors, many with unspecified amounts. The hearing lasted less than two hours.
Cheryl Bergian, a Fargo lawyer, has been appointed trustee by the U.S. Bankruptcy Court to review the company's assets and to liquidate the assets that could benefit the unsecured creditors. Dollar figures are not yet available because of the number of security interests, she said.
"Until that secured collateral is disposed of, it's difficult to say what the end result will be for unsecured creditors," Bergian said. In an interview, Bergian said it could take months to more than a year before the bankruptcy case runs its course.
ADVERTISEMENT
Bergian and others asked McMartin the basics about how McM "land swaps" - trades for potato land - and "unit-retains," a system of American Crystal Sugar Co.
Douglas W. Murch is an attorney with the Conmy Feste Ltd., firm in Fargo, locally representing BMO Harris Bank, N.A., of Carol Stream, Ill., the farm's primary operating lender with a claim of $43.19 million in "secured" debt, or 90 percent of debt in that category.
McMartin told Murch he owed more than $300,000 to Kenny Johnson of Walhalla, N.D., and currently works for a farm that is owned by Johnson. He said he owed Johnson for some share-crop leases in which McMartin was to receive two-thirds of the proceeds and Johnson was to receive one-third. He said there were no efforts to shift McM leases to Johnson or others.
McMartin, flanked by his lawyer, Jon Brakke of Fargo, described a stressful 2016. He said BMO Harris in June had insisted he hire a "turnaround consultant," Harney Management Partners, LLC, of Austin. McM's office manager left the company in late July but continued to help with company payroll into December. Harney Management then resigned without explanation in September. Then Martin hired Davis Jackson, a senior consultant in Harney Management Partners, as a financial consultant, through the bankruptcy filing.
Kayla D. Britton, a lawyer with the Faegre Baker Daniels LLP firm of Indianapolis, Ind., represents Crop Production Services, Grand Forks, N.D., which has a $3.68 million claim. She asked about the market value of McM potatoes still in storage at wash plants in the region.
McMartin described other potatoes in storage at Crystal, N.D., that he had kept for his own use as seed to plant the 2017 crop. He acknowledged those potatoes intended for seed theoretically could be sold as commercial potatoes but said cosmetic imperfections would mean they'd probably have a non-economic value of as little as $2 per hundredweight. He said the seed would not be insurable for third parties to use as seed.
Bergian confirmed to Agweek that - before the bankruptcy was filed in North Dakota - BMO Harris separately had been attempting to get a receiver named in federal district court in Minnesota to take over the assets of McM Inc. and establish a receivership. The first hearing on that request was to have been Feb. 10, the same day that the bankruptcy was filed in Fargo, ending the lender's action.
The receivership would have allowed the assets of McM to be liquidated, but it wouldn't have involved all creditors since just one creditor was requesting to have a receivership established, Bergian explained.
ADVERTISEMENT
"Bankruptcy provides the opportunity to have all creditors to assert their security interests or debts in a bankruptcy," she said.
