Sunland preparing for bankruptcy since April

Officials say ‘things happened’ Oct. 7 to force closing

By Robin Fornoff

CMI PROJECTS EDITOR

rfornoff@cnjonline.com

and

Christina Calloway

CMI Senior Writer

ccalloway@pntonline.com

 

Defunct peanut processor Sunland Inc. may have stunned and surprised Portales and much of eastern New Mexico by declaring bankruptcy and shutting its doors this month.

But documents filed in federal court show the one-time giant of the peanut industry had been preparing for the possibility of bankruptcy for the past six months, even while negotiating with Portales city officials for a $500,000 grant.

CMI file photo The Sunland peanut plant closed on Oct. 7.

CMI file photo
The Sunland peanut plant closed on Oct. 9.

The city ultimately gave Sunland $150,000 about a month after the company’s board of directors adopted resolutions on April 17 to start bankruptcy proceedings.

The disclosure — part of an Oct. 8 resolution approved by Sunland’s board of directors — is included in more than 500 pages of documents the company filed in U.S. Bankruptcy Court shortly after announcing operations had ceased and it was seeking Chapter 7 protection.

City Manager Doug Redmond said Sunland officials never said anything about bankruptcy or money problems during negotiations that began in early March. Quite the opposite, Redmond said, Sunland Chief Executive Officer Jimmie Shearer presented the city with financial statements indicating the company was solvent and had just received a $3 million loan from a Denver bank to purchase new equipment.

“I asked them in a meeting … is another shoe going to drop,” said Redmond. “Nothing.”

“I feel like had … there been an event like this that occurred, they should have notified the city,” said Redmond. “I would have wished they would have said ‘hey, this has come up.’”

Shearer refused comment on the disclosure, saying, “I’m not talking about the past.”

Sunland’s bankruptcy attorney William J. Arland III said it “would not be accurate” to assume Sunland had been planning bankruptcy since April, but he declined to elaborate.

“The document speaks for itself,” he said.

Arland’s sentiments were echoed by Sunland board Secretary Wayne Baker, who insisted the company wasn’t exploring bankruptcy options until Oct. 7, the day before it decided Chapter 7 protection was the only option.

“Our attorneys advised us (in April) we needed that resolution in place,” said Baker. “We weren’t ever exploring it (bankruptcy). We felt confident we were going to keep it going even up to the day before we closed it.”

Baker said “some things happened” Oct. 7 that forced the board’s decision to seek bankruptcy protection. He declined to elaborate.

In its Oct. 9 announcement of the bankruptcy, Sunland cited the impact of a voluntary product recall and a government enforced plant shutdown last year after the Food and Drug Administration traced 41 cases of salmonella poisoning in 20 states to the company’s products. All 41 people sickened by Sunland’s products recovered.

Baker said lawsuits filed by victims of salmonella played a part in cash flow problems at Sunland “but we thought we were getting those done. Some things happened on the day before (the closing) … it just got to the point we couldn’t do it anymore.”

Baker said Sunland was “basically operating on a day-to-day basis.”

“Basically the cash flow just went away and we couldn’t function anymore,” he said.

Redmond said Sunland originally applied for a $500,000 grant from the city’s Local Economic Development Act (LEDA) fund in early March. LEDA money is collected as a portion of gross receipts taxes.

Redmond said because the LEDA fund only had a balance of about $1 million, he recommended Sunland be given a grant of $50,000 and a loan for the remaining $450,000.

The LEDA board, however, voted May 21 to give Sunland a $150,000 grant. LEDA board member and City Attorney Randy Knudson said no one was aware of Sunland’s April 17 resolution to commence bankruptcy proceedings.

“Our intentions,” said Knudson, “were to save jobs here in this community.”

Knudson said he and other LEDA board members were aware the recall and plant shutdown had hurt Sunland and there was risk. He said company representatives never indicated there was certainty it could continue to stay in business.

“But there are no certainties in cases like these,” Knudson said.

Mayor Sharon King said she doesn’t believe Shearer or Sunland tried to deceive the city.

“I really believe at the time that they asked for LEDA funds that they really felt like they’d be continuing to go on and they were asking for the money in good faith,” said King.

Redmond said the $150,000 was designated to be used to address FDA mandated changes in Sunland’s peanut butter manufacturing. Specifically, he said, for quality control and training employees in safe manufacture and handling in the peanut butter plant.

Baker said the cash was used to develop a sanitary plan.

“We got to the point where we just laid down at the feet of the FDA and said, ‘Tell us what to do. Tell us what you want,’” said Baker. “That money was used to do whatever the FDA asked in the peanut butter plant.”

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