Country Fresh, lenders get conversion of bankruptcy to Chapter 7

By Sarah Lizee

Olympia, Wash., June 22 – Country Fresh Holding Co. Inc. and an informal group of its secured lenders secured conversion of the company’s Chapter 11 bankruptcy cases to Chapter 7, according to an order filed Monday with the U.S. Bankruptcy Court for the Southern District of Texas.

As previously reported, the debtors started their Chapter 11 cases with the objective of maximizing value for their stakeholders, including creditors, employees and vendors, by selling substantially all of their assets on a going-concern basis. The sale was approved on March 29 and closed on April 29.

The debtors and lenders had said in their motion that, notwithstanding the sale, there are insufficient funds in the debtors’ estates to pay all claims necessary to confirm a Chapter 11 plan, including administrative and priority claims, let alone secured claims.

Also, any plan process would be costly and potentially litigious as there is no likelihood of a distribution to unsecured creditors, the motion said.

The group added that a litigious plan process would only further deplete estate resources and render futile any hope of a recovery to senior creditors in accordance with their relative priorities.

A qualified trustee, if necessary, could cost-effectively administer the debtors’ remaining obligations and attend to the wind-down of the estates, including distributions to creditors, on a cost basis more reasonably than by continuing the Chapter 11 cases, the motion said.

The secured lenders said they had advised the debtors that, while they were not prepared to fund a Chapter 11 plan process, they would be willing to make some of their cash collateral available to a Chapter 7 trustee upon conversion to the extent necessary to address items related to the U.S. transition services agreement.

The official committee of unsecured creditors had raised concerns about the conversion, because the first motion provided for a delayed conversion of the cases following a court order. However, the cases were converted immediately following Monday’s order.

The Woodlands, Tex.-based company provides fresh-cut fruits and vegetables, ready-to-go meals and meal kits, behind-the-glass salads, snacks and bulk food components. The company filed bankruptcy on Feb. 15 under Chapter 11 case number 21-30574.

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