Northern Beef Packers laid off workers, needed more funding, eventually files Chapter 11 bankruptcy
The Northern Beef Packers plant, which opened in October 2012, is the most state-of-the-art facility in the U.S.
In February 2012, EB5info.com reported on issues and setbacks surrounding the creation of Northern Beef Packers in Aberdeen, SD, an EB-5 funded project of the South Dakota Regional Center Inc. (SDRC), an independent and privately-owned company established in late 2008. There were lawsuits over commission disagreements and nuisance concerns, a civil lawsuit, and all told by 2011, 20 companies had filed liens against the plant in excess of $10 million.
With this history of lawsuits, liens, and tax issues, the NBP project was still not operational nearly six years after the site was purchased by the original developers. After enduring all of these setbacks, including flooding rains and a global recession, the facility opened its doors on October 17, 2012. Now this $115 million processing plant has filed for Chapter 11 bankruptcy.
Setbacks, Lawsuits, Issues
One particular lawsuit was a direct result of the EB-5 Program. A group of Chinese EB-5 investors filed a lawsuit against Song and his organization that handled the EB-5 investment contracts in October 2011. The lawsuit does not involve the Northern Beef Packers corporation directly. The suit was directed at the person and the organization contracted by the state to handle the recruiting and processing of investors under the EB-5 provisions. It listed the defendants as SDRC, Inc., a South Dakota corporation; and Joop Bollen, an individual resident of South Dakota, who is managing director of SDRC Inc.
All this aside, in January 2013, the company released a statement announcing that it had successfully completed its final round of financing, bringing the total financing raised to over $150 million. It also stated that the company had hired over 350 employees to date, and that it would continue to grow its skilled workforce to over 500 employees in the weeks ahead as production continues to increase.
At full capacity, the processing plant is capable of harvesting 1500 head of cattle per shift, resulting in more than one million pounds of boxed beef and offal products produced every day at the facility.
However, by the middle of April, NBP laid off 108 workers citing a lack of working capital to buy and process cattle, plant officials said. At a news conference about the layoffs, president and CEO of the company David Palmer said the layoff is expected to be short term and that the plant needs to raise about $20 million more.
In an article by the Aberdeen News, company officials were quoted saying:
"This is an unfortunate setback, but we are confident that this is only temporary," Palmer said. "The employees at Northern Beef Packers have been our biggest asset thus far, and we expect to begin rehiring and expanding our operation as soon as the additional financing is in place."
Employees could be called back as soon as mid- or late July, he said. Northern Beef had about 420 employees before the layoff. Those let go were mostly production employees on the slaughter and packaging sides of the plant, said A.J. Munger, director of business development, pricing and marketing. Munger said the problem has been a lack of financing, which has prevented the plant from buying cattle. Reportedly, NBP were only processing cattle three days a week. Reportedly, Northern Beef has never came close to operating at its planned capacity of 1,500 cattle a day. Then came this, as reported by the Aberdeen News:
On July 19 Northern Beef Packers filed Chapter 11 bankruptcy in order to reorganize its debt and hopefully emerge stronger. According to Bollen, the plant is the newest, most up-to-date beef plant in the U.S., so the possibility also exists that it could be sold. “Northern Beef does have a good chance to come out of this in a stronger condition and continue to operate,” he said. Unfortunately for NBP, it came into operation right when beef prices skyrocketed.
“Most likely there will be loss of capital for the EB-5 investors, I hope not but I don’t see how there can’t be, and based on USCIS guidelines the visas for the EB-5 investors are going to be fine. Money was invested and jobs were created,” Bollen explained.
Shortly after filing Chapter 11, NBP laid off another 260 employees. The laid-off workers have grievances as they learned the week of the layoff that they would not be receiving a paycheck for their previous two weeks of work. Because of the debt protection offered in Chapter 11 bankruptcy, the company doesn’t need to compensate its employees until the reorganization has been completed. The laid-off employees are eligible for unemployment benefits.Six employees remain to oversee the bankruptcy proceedings.
The next step for the beef plant is to file documents with the U.S. Bankruptcy Court for the District of South Dakota by Aug. 8. The beef plant owes 277 unsecured creditors in the United States and Korea millions of dollars, with Oshik Song being the largest creditor owed at $1.04m.
The Aberdeen News has compiled a timeline of events at NBP based on newspaper articles from their archives that makes for very interesting reading.