BARELY nine months after opening its doors, Northern Beef Packers (NBP) in Aberdeen, S.D., has filed for bankruptcy and dismissed the bulk of its workforce.
The embattled company filed for Chapter 11 protection in the U.S. Bankruptcy Court for the District of South Dakota on July 19 and laid off 260 workers last Wednesday.
In a statement, NBP said the Chapter 11 protection was needed to provide additional time and interim working capital so NBP could complete its restructuring initiatives. The company said it had negotiated a debtor-in-possession financing facility with a group of secured lenders and other interested parties, but local reports last week suggested that the financing fell through, necessitating the lay-offs.
"For the last several months, we have been working to secure a strategic equity investment to move our business into the next phase of production," NBP chief executive officer David Palmer said in a July 22 statement. "Due to the size and importance of this investment, the process is taking longer than what was originally expected. At the same time, the beef packing industry has been experiencing some of its worst processing margins in recent decades, causing expected start-up costs to be much higher than anticipated. This has significantly reduced our cash position and is preventing us from meeting our current obligations."
Palmer called the filing a "significant step towards remedying this situation" and later denied reports that he had resigned his position with the company. NBP has laid off all but six employees necessary for maintaining the idled facility during the bankruptcy process.
In April, the fledgling enterprise laid off 108 of its original 420 workers because of its precarious capital position. In June, NBP was fined $7,315 after wastewater escaped from a breached wall at one of its treatment lagoons and flowed into nearby Moccasin Creek.
The plant has had nothing but headaches from the get-go. Plans for the facility were originally announced in 2006, but the project endured multiple delays and a change in primary ownership. According to information from the company, investors have poured more than $109 million into the $115 million, 420,000 sq. ft. facility, with total financing topping $150 million.
Heralded as the first complete beef processing plant to be built in 35 years, the NBP plant was slated to process 240 head per hour, producing more than 1 million lb. of boxed beef and offal products daily. The company estimated that 350,000 cattle are fed within 150 miles of the plant and that there are 750,000 cattle within 200 miles of the Aberdeen operation.
Reports of financial troubles began to surface the week prior to the bankruptcy filing, with workers telling local media outlets that they hadn't been paid for at least two weeks.
Local rancher and investor Herman Schumacher told the Aberdeen News that while the plant owes him money he lent as an unsecured creditor, the firm did pay him for his cattle. He told the paper that he believed all cattle producers had been paid for cattle sold to the packer.
Court filings indicated company assets of $50-100 million and debts of $10-50 million. NBP reportedly owes its top 20 creditors anywhere from $81,000 to more than $1 million, including $500,000 in back property taxes and $182,000 to the city for unpaid water and sewer services.
The plant is primarily owned by Korean investors. Managing partner Oshik Song, veteran of a successful manufacturing corporation in the country, is said to have returned to Korea to confer with the syndicate about the future of the company.