AgriBioTech bankruptcy sales should produce $50 million

Grace Leong

Monday, July 17, 2000 | 11:57 a.m.

AgriBioTech Inc. of Henderson, the world's largest forage and turfgrass seed producer, last week received bankruptcy court approval for the sale of almost all of its assets. The sales are expected to net the company and its creditors about $50 million.

The company, which struggled to consolidate 34 acquisitions over the last six years, filed for Chapter 11 bankruptcy in January after it failed to secure a new financing package from GE Capital Corp. The company's revenues had suffered due to a worldwide oversupply of seed, a downturn in industry pricing and slow cash collections from customers due to a weak agricultural economy.

Development Specialists Inc., a Chicago-based crisis management company, took over day-to-day operations in February. AgriBioTech has reduced its headcount to 599 employees from about 972 as of Dec. 31.

AgriBioTech owns genetic breeding research and development programs and seed processing plants that clean and pack seed grown under contracts with farmers for the company. It said creditors including growers, licensors and banks urged the company to dispose of its assets quickly to preserve its estate value.

Growers who are keen to dispose of their 1999 inventory and want to know what to do with the current 2000 seed crop reached a settlement with AgriBioTech that sets a number of target dates for the purchase of growers' contracts and for the sale of seed varieties of which AgriBioTech owns proprietary rights.

Unless the sales process moves ahead quickly, those dates will be breached and the growers will sell those seed varieties and this will diminish the value of the company's assets to a potential buyer, AgriBioTech said. "The growers have to know whether to carry on growing the seed crop that was planted in November or plough it out because the company won't be around for the 2000 harvest. They need to know who is going to buy that crop," said William Brandt of Development Specialists.

AgriBioTech said it obtained an emergency order April 26 that permits it to sell "distressed" seed below cost to prevent over-supplied varieties of seed from becoming completely valueless.

AgriBioTech, which negotiated a debtor-in-possession financing loan with a lending group led by Bank of America to pay employee salaries and benefits during its restructuring, said the loan will expire on July 31. It owes the group $42 million. AgriBioTech's motion to auction almost all of its operating businesses faced 26 creditor objections, but most of these were resolved before last week's hearing in U.S. Bankruptcy Court. Judge Linda Riegle approved on Wednesday the sale to Pickseed Canada Inc. for $3.8 million of an Ontario seed processing plant, the last operation to be sold. The company will have just a few remaining real estate, inventory and equipment assets to be disposed of at liquidation.

Riegle approved on Monday the sale of the company's turfgrass seed assets for around $24 million plus the assumption of liabilities to a group that includes J.R. Simplot of Boise, Idaho; ProSeeds Marketing Inc. and AgriBioTech's former president and chief operating officer Kenneth Budd's KRB Seed Co. LLC.

"AgriBioTech's turfgrass seed division was the most sought after. There were two potential overbidders but their bids didn't qualify," said Bradley Sharp of Development Specialists.

Also approved was the sale of AgriBioTech's forage assets to Research Seeds Inc. of St. Joseph, Mo., for about $15 million and the sale of HybriGene LLC, a biotechnology company with patents for seeds that yield plants that are disease and herbicide resistant, to a large agricultural grower, Bill Rose LLC, for $1.8 million cash minus liabilities.

AgriBioTech received court approval to sell an Oregon-based turfgrass warehouse and distribution center for $725,000 to Mountain View Seeds, and one other facility for $725,001 to Willamette Grass Seed LLC.

Also approved was a $1.6 million acquisition by Dairyland Seed of Milwaukee of growers contracts and an alfalfa seed facility in Homedale, Idaho; and a bid by Northwest Seeds LLC of Nampa, Idaho, of $2.6 million for inventory, growers contracts and two forage facilities in Nampa and in Powell, Wyo.