No News from the Agriprocessors Bankruptcy Auction Could be Bad News for Postville

POSTVILLE, IA — When the beleaguered Agriprocessors meatpacking plant first filed for Chapter 11 bankruptcy protection, a small glimmer of hope emerged in Postville. There was an opportunity for another company to take over operations at the plant, for production to continue and for the community not to lose its largest employer.

Although the final gavel was not swung today in Cedar Rapids at the bankruptcy auction, it is becoming much more likely that no agreeable buyer will emerge.

Natural Source Holdings L.L.C., a company that doesn’t garner a single Internet search engine entry, provided what the bankruptcy trustee deemed the best and highest bid: $5.5 million.

Other bidders were Kosher Standards LLC, T5 Equity Partners LLC and Private Equity Ventures LLC (an affiliate of T5).

Despite several breaks in the actual court proceedings designed to allow the bidders time to discuss their initial bids, inclusion of assets and other considerations, no stalking horse emerged.

Roughly four hours after the auction began, two creditors placed their own bids in an attempt to reclaim their own collateral.

First Bank Business Capital, Inc., a company allegedly owed $35 million in revolving loans, bid $20 million for all of it on pre-petitioned debt, all its own pre-petitioned collateral and all like-kind post-petition collateral.

MLIC Asset Holdings LLC, doing business as MetLife Ag Investments, bid $6.5 million. The bid would cover $9.6 million in debt for real estate subject to mortgage. Counsel for the company also made clear that the bid would cover “equipment and all other assets as described in the mortgage agreement.”

Although the auction proceedings will commence again at 9 a.m. on Tuesday morning, it is unlikely that a third-party bidder will materialize. Without such a bidder, it is extremely unlikely that the bankruptcy trustee or the court will allow a sale for such a meager amount. The two most likely options are that the judge will either order the trustees to attempt another Chapter 11 sale, or the case will move into Chapter 7 liquidation proceedings.