AgFeed USA bid procedures, cash collateral use get court approval

By Jim Witters

Wilmington, Del., Aug. 1 - AgFeed USA, LLC won approval for bidding procedures for the sale of most of its assets and final approval for use of cash collateral through Aug. 31 during a hearing in the U.S. Bankruptcy Court for the District of Delaware.

The official committee of unsecured creditors and an informal committee of equity interest holders had objected to the bid procedures, seeking an additional 15 to 20 days for bidding and a cap of 3% of the sale price for the sum of the stalking-horse's breakup fee and expense reimbursement.

During the Aug. 1 hearing, judge Brendan L. Shannon said the bid protections for the stalking horse were "a little rich" and the timeline for the sale quite compressed. But the debtors convinced him that the value of the assets would continue to diminish with time.

As previously reported, stalking-horse bidder Maschhoffs, LLC has offered $79 million for the assets, which include hog farms in Iowa, North Carolina and Colorado. The purchase price is subject to working capital adjustments.

AgFeed's Oklahoma operation, the assets of parent AgFeed Industries and its Chinese subsidiaries are not included in the sale but are being marketed separately.

AgFeed attorney Robert Brady told the court that the Maschhoffs deal would result in a cash payment of $66.6 million and assumption of $5.1 million in liabilities, if the sale closes on Aug. 31.

AgFeed also will be left with about $7.1 million in cash that is not being acquired in the sale, he said.

Bid procedures

Under the bidding procedures approved during the hearing:

• Competing bids are due by 4 p.m. ET on Aug. 21;

• Bids must exceed by $250,000 the sum of the stalking-horse bid, the breakup fee and the expense reimbursement;

• Bidders must provide a $7.9 million cash deposit;

• An auction, if needed, would be on Aug. 26;

• Bidding increments at the auction would be $250,000;

• If Maschhoffs is not the successful bidder at auction, it will be entitled to a breakup fee of $2.37 million and reimbursement of expenses up to $790,000;

• The sale hearing is scheduled for Aug. 29; and

• The sale must close on or before Aug. 31.

Judge Shannon said his approval of the expedited sale process is open to reconsideration at the sale hearing, if one or more bidders asserts that the timeframe impeded their ability to participate.

AgFeed USA, an Ames, Iowa-based producer of animal feed, filed for bankruptcy on July 15. Its Chapter 11 case number is 13-11761.

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