By Robin Fornoff
CMI projects editor
More documents filed recently in the Sunland bankruptcy case indicate the defunct peanut processor spent weeks planning a Chapter 11 reorganization before deciding to shut it down and seek Chapter 7 protection.
Other filings in federal bankruptcy court indicate at least two of Sunland’s three major creditors believe the company has inflated its assets.
Sunland closed its doors Oct. 9 owing $15.4 million to three secured creditors, retail giant Costco, CoBank of Denver and Production Credit, according to court records.
Those same records indicate Sunland still has cash in the bank amounting to about $4 million.
Sunland estimates its total assets at $49.4 million, including buildings and equipment. An attorney for CoBank and Production Credit of Southern New Mexico called Sunland’s estimates “wildly optimistic” in a a document filed Monday in U.S. Bankruptcy Court in Albuquerque.
“Production Credit and CoBank believe that they (Sunland) are actually undersecured,” attorney Paul Fish said.
The disclosures on bankruptcy planning are found in documents filed by attorney Thomas Walker, who represents the trustee charged with liquidating Sunland’s assets and distributing proceeds to creditors .
In an affidavit, Walker states he worked for Sunland “several weeks” prior to the company shutdown “in connection with preparation for a Chapter 11 case filing that did not occur.”
The Sunland board of directors on Oct. 8 opted instead to seek Chapter 7 protection.
Walker’s affidavit doesn’t indicate the dates he worked for Sunland. The Sunland board’s Oct. 8 resolution that shuttered the plant the next day indicates they gave permission April 17 to start bankruptcy proceedings.
A Chapter 11 bankruptcy is a reorganization plan that allows a company to continue functioning with creditors agreeing to accept less, often significantly less than they are owed.
Chapter 7 bankruptcy closes the doors and a trustee is appointed to sell off assets and distribute the money among creditors.
Walker also filed a motion Friday requesting authority to use the estimated $4 million in cash on hand to pay Sunland’s “business and administrative expenses,” including “professionals employed by the Debtor … to the extent authorized by the court.”
Walker also told the court that he would use the cash to preserve Sunland’s assets for liquidation sale and to address numerous pending lawsuits connected to the federal shutdown of the plant last year.
A budget submitted with Walker’s request shows Sunland CEO Jimmie Shearer getting paid $48 an hour to remain and assist the trustee. Five other Sunland managers will also be paid at rates ranging from $26 to $15 an hour.
Also among the most recent filings, a demand from Tifton Quality Peanuts in Tifton, Ga., that it be able to reclaim what’s left of almost 200 tons of peanuts sold to Sunland from August through September with an estimated value of $340,560.
Berlin Packaging of Chicago filed a demand for return of goods on Monday, submitting invoices totalling $817,476 for “all canisters, jars and other containers” delivered to Sunland from Aug. 28 to Oct. 9.