Pipeline Foods, LLC – Organic Supply Chain Specialist Owned by AMERRA Capital Management Files Chapter 11 with Over $100mn of Liabilities

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July 8, 2021 – Pipeline Foods, LLC and four affiliated Debtors (“Pipeline” or the “Debtors”) filed for Chapter 11 protection with the U.S. Bankruptcy Court in the District of Delaware, lead case number 21-11002 (Judge Owens). The Debtors, "the first U.S.-based supply chain solutions company focused exclusively on non-GMO, organic, and regenerative food and feed," are represented by Mark Minuti of Saul Ewing Arnstein & Lehr LLP. Further board-authorized engagements include (i) Bryan Cave Leighton Paisner as counsel to the Debtors' Board, (ii) SierraConstellation Partners LLC as as financial advisors and to provide a chief restructuring officer (Winston Mar) and (iii) Stretto as claims agent. 

The Debtors’ lead petition notes between 200 and 1,000 creditors; estimated assets between $100.0mn and $500.0mn; and estimated liabilities between $100.0mn and $500.0mn. Documents filed with the Court list the Debtors’ three largest unsecured creditors as (i) Simmons Feed & Supply LLC  ($5.2mn "customer advance" claim), (ii) Agri Exim DMCC ($2.6mn trade debt claim) and (iii) Jim Wolf ($2.2mn dispute note payable claim).

The Minneapolis-based Debtors are 97.5% owned by an affiliate of agriculture investment specialist AMERRA Capital which made its investment in February of 2017.

In a press release announcing the filing, the Debtors advised that: “The Company will continue its pre-filing efforts to evaluate any and all strategic alternatives, including a sale of all or substantially all of the assets of its businesses in an effort to maximize value and recovery for all creditors. In parallel with this process, the Company expects to request authority to sell its grain inventory outside of the ordinary course at market prices in an effort to facilitate the Company's use of cash collateral.”

Anthony Sepich, the Debtors’ CEO commented further: “"[t]he impact of the Coronavirus (COVID-19) pandemic coupled with the Company's secured debt obligations have caused significant financial distress on our business. As a result, we believe that a bankruptcy filing and a potential sale of the business, portions of the business, and certain of its assets is the best path forward to unlock value for the benefit of all creditors. ”

As of writing, only the Petitions have been filed, with the Debtors' lead petition noting only its "current financial position" as necessitating the need to seek bankruptcy shelter. Notwithstanding the references as to a possible asset sale, no sign so far of an investment banker, with Board minutes attached to the Debtors' lead Petition not referencing either DIP financing or an intended sale process; although that may only reflect the possibility that bankruptcy-precipitating events have evolved rapidly for these Debtors. In many cases where we see just a Petition and then effectively radio silence for days, the filing has been made to avoid an imminent (and not entirely prepared for) threat from one or more creditors.

In an October 2020 interview, Neil Juhnke, the Debtors' senior vice president of physical operations, noted as to the Debtors' rapid growth (almost $300.0mn in gross annual revenues after only three years in operation): “The growth appears to be both recession-proof and pandemic-proof, so far…” That sanguine assessment has clearly not sustained the prolonged impact of COVID-19 on global supply chains for this suppy chain specialist.

About the Debtors

According to the Debtors: “We are experts in our respective areas, united by integrity and respect for relationships and the earth. Our teams promote transparent and collaborative business practices while working towards our goal to meet current demand for organic and non-GMO crops grown in the Americas."

Recent AgWeek coverage notes: "Pipeline Foods annually buys grains from about 1,100 farmers in Canada and another 1,800 in the United States. They draw from 18 states, but about 80% comes from the Dakotas, Minnesota and Iowa.                 

The majority of crops are corn, soybeans, yellow peas, wheat, barley, oats, dry beans and variety of pulses. There are specifications within those categories, including variety.                   

About 80% are long-established organic producers, but they’re always looking for new suppliers, and have several initiatives to help them get started. 

The company is focused on North America and Pacific Rim countries, for non-GMO and organic, identity-preserved traceability. Juhnke said about 60% of Pipeline Foods’ products sold are for feed and 40% for food, but the value is the opposite — about 60% food and 40% feed."

Corporate Structure

  • Debtor Pipeline Holdings, LLC is owned by non-debtors: AMERRA PF Holdings, LLC (97.5%), Pipeline Opportunity Partners, LLC (1.3%), OV Holdings, LLC (0.7%), SISJAS LLC (0.3%), and Moore Lake Equity Partners, LLC (0.2%). 
  • Debtor Pipeline Foods, LLC is 100% owned by Debtor Pipeline Holdings, LLC. 
  • Debtor Pipeline Foods Real Estate Holding Company, LLC is 100% owned by Debtor Pipeline Foods, LLC. 
  • Debtor Pipeline Foods, ULC is 100% owned by Pipeline Foods, LLC. 
  • Debtor Pipeline Foods II, LLC is 100% owned by Pipeline Foods, LLC. 
  • Debtor Pipeline Foods Southern Cone S.R.L. is owned by Pipeline Foods, LLC, (99.5% ) and Pipeline Foods II, LLC (0.5%).

About AMERRA Capital Management, LLC

According to AMERRA: "AMERRA Capital Management, LLC is a New York based agribusiness asset manager with over $1.8 billion in AUM. AMERRA deploys capital supporting growth-oriented agribusinesses around the world and seeks to add value as a supportive and active partner with a full spectrum of customized equity and debt capital strategies.Since its inception in 2009, AMERRA has completed over 250 investments with an aggregate value in excess of $3.3 billion."

 

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