Agriprocessors Auction Falls Apart

POSTVILLE IA — Attempts to sell machinery, land and other property from Postville’s debt-riddled kosher meat plant collapsed Tuesday after potential buyers failed to make an offer that satisfied the plant’s two largest creditors.

A spokesman for the slaughterhouse’s court-appointed trustee said talks would continue behind the scenes, with a possible deal emerging by next week.

But the stalemate could threaten the future of Agriprocessors Inc. if no buyer emerges to help finance the operation.

Agriprocessors was the site of a major immigration raid in May that led to the arrests of nearly 400 workers, mostly from Guatemala and Mexico. It was once the largest kosher meat packing plant in the country and the largest employer in the Allamakee County town of Postville.

Top managers were charged with federal and state crimes several months after the raid, and the plant in November was forced to file for Chapter 11 bankruptcy protection.

The bankruptcy dispute revolves around the plant’s two largest credit holders, First Bank Business Capital and MLIC Asset Holding, an affiliate of Metropolitan Life Insurance. Both lenders, who are owed a combined $26 million, can block any offer by a bidder they deem too low.

Dan Childers, a lawyer who represents trustee Joseph Sarachek, suggested earlier in the day that the talks might lead to higher bids. The Cedar Rapids lawyer told U.S. Bankruptcy Judge Paul Kilburg that Sarachek wanted to explore “additional avenues” for the property at stake, “which could lead to better bids.”

The top offer to buy the plant’s assets reached $15.7 million on Tuesday — nearly three times higher than Monday’s bids, but still far short of the $40 million offered by an Israeli company in January.

Such avenues, in theory, could include additional buyers or a revised deal between one of the current bidders and the plant’s creditors.

Childers did not elaborate, and declined to comment after the hearing.

Sarachek fought to reach a deal with an effort “above and beyond what we expected they’d be able to do,” said Lloyd Palans, a lawyer for the St. Louis-based First Bank Business Capital. But Palans said the progress still had not satisfied his bank.

The $15.7 million offer by Kosher Standards would give $13.5 million to the plant’s two main creditors, First Bank Business Capital and MLIC Asset Holding, an affiliate of Metropolitan Life Insurance. Both creditors blocked the sale on Monday because they were not satisfied with the bids.

A spokesman for the Orthodox Union, a Jewish outreach group, said he had not heard of Kosher Standards.

The remaining $2.2 million would buy out all of the plant’s existing leases. Under the proposal, Kosher Standards would pay $500,000 if its representatives decided to back out of the deal.

Agriprocessors filed for Chapter 11 bankruptcy in November and reported debts to nearly 400 people, businesses and organizations. Nearly 120 are based in Iowa and vary in size.

Creditors who did not secure their loans, including many small businesses in Postville, cannot seek reimbursement for unpaid debt because of the plant’s bankruptcy protection.

Agriprocessors still owes Bodley Equipment & Repair in Postville a few thousand dollars for machinery, said owner Craig Bodley.

Bodley said he doubted he would recoup any lost payments.

“It’s tough,” he said. “Not much you can do, except bite the bullet. We’re all kind of wondering what’s going to happen with the plant.”