By Robin Fornoff
CMI PROJECTS EDITOR
Retail giant Costco could get back most of the estimated $12.5 million worth of peanuts it purchased for defunct Portales processor Sunland Inc. under a complicated deal granted in bankruptcy court.
The deal approved in late December by U.S. Bankruptcy Judge David Thuma allows Costco to retrieve the peanuts from storage at facilities across eastern New Mexico and West Texas. Costco must pay accumulated storage costs and has a right to reject any of peanuts that fail to meet its quality standards, according to court documents.
At least one firm, Kelly Green Commodities Inc. of Farwell, filed claims in November saying it was owed about $250,000 for storing some of the peanuts when Sunland filed for Chapter 7 bankruptcy protection in October. Others owed storage costs include R&L Peanut Co. in Portales.
Thuma’s decision means Sunland can no longer count the peanuts among its assets to eventually be divided up by its creditors.
Costco lawyers say the company fronted Sunland $20 million between December 2012 and February to meet its product demand and help the troubled peanut processor stay afloat.
Sunland’s products were directly linked to a nationwide Salmonella poisoning, prompting a federally mandated shutdown. Sunland was strapped for cash after rebuilding its peanut butter processing plant to meet standards dictated by the FDA, according to court records.
Costco canceled the deal five days before Sunland filed for bankruptcy protection. Lawyers for Sunland, once the nation’s largest processor of organic Valencia peanuts, say Costco still owes the company about $4 million for peanut butter it made for the retail giant.
Costco was once Sunland’s largest customer. It is also one of its three largest secured creditors in the bankruptcy case, who are owed an estimated $16 million.