Focus Management Group

Our Work with a Troubled Dairy Farm

Liquidation Planning, Performance Assessment and Collateral Monitoring of a Dairy Herd

Company:

The Company was a 600 cow dairy operation in Kentucky that had filed for Chapter 11 bankruptcy protection. The lender was concerned about the quality of information and the management of their collateral.

Situation:

Lender understood they were in a significant overadvance situation, and they were being held hostage by a debtor that was responsible for live collateral of the lender. The debtor was performing below their own budget, and was not providing timely financial or operating performance information.

Focus Scope:

Focus was hired to develop a liquidation plan that provided a blueprint for liquidation in the event the debtor “walked away” from the operation. In addition Focus was asked to monitor the performance of the operation against plan, and to ensure the inventory of live animals was properly accounted for.

Tasks Performed:

  • Focus prepared an onsite evaluation of the collateral and a roll forward of inventory.
  • In this process Focus discovered that collateral had been sold outside the normal course of business and that all proceeds were not remitted to the debtor for use for operations.
  • It was also discovered that the milk production estimates going forward were unadheivable based on the herd.
  • Focus uncovered sale processes and techniques to specifically use related to this dairy operation, its physical location and the markets available.

Results:

  • The lender and counsel were able to use the information uncovered related to collateral sales and proceeds to effect the ceasing of operations and liquidation of collateral.
  • The lender and counsel were able to enter the negotiations from a position of knowledge and power as a result of the detailed liquidation plan Focus developed and the inforamtion relative to collateral sales which Focus uncovered and documented.
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