Bids increase for Agriprocessors, but still may not be enough

Creditors of and potential bidders for the embattled Agriprocessors meatpacking plant in Postville appear to be in a standoff.

Additional time devoted to the bankruptcy auction this morning in Cedar Rapids did garner additional and more lucative bids from two companies, but were not enough to prompt two major credit holders to back away from their first right to assets.

Natural Source Holdings LLC, a relatively unknown company registered in Delaware, went home Tuesday night with what the bankruptcy trustee deemed the “best and highest” bid: $5.5 million.

A bidding war of sorts sparked when the auction resumed Tuesday morning between Natural Source Holdings and Kosher Standards LLC, another virtually unknown entity.

Natural Source Holdings bid a total of $14.5 million. Of that amount, the company indicated $6.5 million ($.35 million in cash and $3 million in a promisory note) would go to creditor MLIC Asset Holdings LLC, doing business as MetLife Ag Investments; $6 million would go to First Bank Business Capital, Inc.; and $2 million would go to buyout leases.

Kosher Standards countered with a similar package that would up the amount given to MLIC to $7 million ($3.5 million in cash and $3.5 million in a promisory note).

Natural Source Holdings then entered another bid totaling $15 million, but made the bid conditional on the two primary creditors withdrawing their bids. When that agreement could not be reached, Natural Source Holdings withdrew its increased bid.

Kosher Standards then upped their bid to a total of $15.5 million by increasing their earlier allotment to First Bank by $300,000 and their allotment to lease buyouts by $200,000.

Natural Source Holdings indicated it was willing to provide a bid in excess of that offered by Kosher Standards, but would only do so with assurances that the creditors would withdraw their bids. The creditors again denied this request.

The final bid accepted during the auction was from Kosher Standards for $15.7 million — $7 million to MLIC, $6.5 million to First Bank and $2.2 million for lease buyouts.

First Bank, a company allegedly owed roughly $35 million in revolving loans, bid $20 million on Monday for all of its pre-petition debt, pre-petitioned collateral and all like-kind post-petition collateral.

MLIC bid $6.5 million for roughly $9.6 million in primarily real estate debt.

U.S. Bankruptcy Court Chief Judge Paul J. Kilburg agreed to temporarily postpone the bankruptcy hearing until 4 p.m. Tuesday.

Dan Childers, counsel for the bankruptcy trustee, indicated that the trustee is now analyzing the company bids against the creditor bids and “is exploring additional avenues.”

Childers told Kilburg that he “believes there is fruitful discussion to be had.”

When questioned by counsel for a creditor, Judge Kilburg indicated that he “doesn’t anticipate there will be any substantive resolution this afternoon” and that the case will likely be heard again next week.

The Agriprocessors meatpacking plant filed Chapter 11 bankruptcy last fall in the wake of financial difficulties many contribute to a massive immigration raid there on May 12, 2008.