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Wednesday, 13 July 2016 14:20

Zelenka Farms files for bankruptcy, closes Grand Haven operations

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Zelenka Farms expects to lay off 300 people at its operations in Grand Haven, shown here. Zelenka Farms expects to lay off 300 people at its operations in Grand Haven, shown here. PHOTO: Mark Sanchez

GRAND HAVEN — A wholesale nursery with operations in West Michigan has filed for Chapter 11 bankruptcy after struggling financially for several years. 

Irving, Texas-based Zelenka Farms will shutter its Grand Haven facility, permanently laying off 300 workers by Sept. 9, according to a Worker Adjustment and Retraining Notification (WARN) Act notice filed with the state. 

The layoffs come as part of a larger capital restructuring strategy to pay back nearly $188 million to creditors, MiBiz has learned through a review of court documents and filings with the Michigan Workforce Development Agency. 

Zelenka Farms, which said it generated about $130 million in sales last year, produces and distributes container-grown shrubs, trees and other plants to big-box retailers such as Meijer, Home Depot and Lowe’s. 

The company leases farms in Michigan, North Carolina, Oklahoma and Tennessee and owns farms in Oregon and Tennessee, according to court documents. Zelenka Farms is owned by Southlake, Texas-based private equity firm Insight Equity.

As reason for the bankruptcy filing, Zelenka Farms cited an “unusually rainy” spring season that drove sales lower than expected and prohibited it from paying down a $28 million revolver loan to PNC Bank, according to court documents. 

Additionally, Zelenka Farms owes $117.9 million on two lien term loans to four other financial institutions and $10.4 million in mezzanine debt to its parent company, Insight Equity. The company also has $9.5 million in trade debt to unsecured investors and $21.9 million in other liabilities. 

Two Grand Haven-based firms, Northland Express Transport and Spring Meadow Nursery Inc., are among the 20 largest unsecured creditors, according to the court documents. Zelenka Farms owes $640,432 to Northland Express and $237,424 to Spring Meadow. 

In a court filing, Zelenka Farms estimates it has between 1,000 and 5,000 creditors and assets valued $100 million and $500 million.

In the bankruptcy proceedings, Zelenka Farms and its holding company, BFN Operations LLC, are being represented by Gardere Wynne Sewell LLP, a Dallas-based law firm. 

The company is currently searching for buyers to purchase its assets, according to industry reports and a source in the nursery industry familiar with the matter. 

In addition to laying off workers at its Grand Haven facility, Zelenka Farms cut 664 jobs and closed four facilities in North Carolina, Florida, Oregon and Tennessee over the last two years, according to an MiBiz analysis of state filings made by the company. 

Zelenka Farms employs a total workforce of 1,600 people, according to court documents.  

FINANCIAL STRUGGLES 

This marks the second time Zelenka has entered bankruptcy in a little over a decade as the wholesale nursery business struggled financially. 

In 2003, the company — then solely based in Grand Haven — declared bankruptcy after losing business with two major customers when Kmart itself entered bankruptcy and Target eliminated its garden center, according to reports. 

Zelenka Farms was purchased later that year by The Berry Family of Nurseries based in Oklahoma.

In 2010, Insight Equity acquired a controlling interest in BFN Operations — the parent company for The Berry Family of Nurseries operations — in a bid to enter the nursery business, according to a statement on the company’s website. 

Each time the company was sold, its debt was rolled over to the new owner, said a source familiar with the matter, who asked not to be named. The source indicated that industry groups have been aware that Zelenka Farms has been in trouble “for a long time and they haven’t been able to work themselves out of it.”

Because of the nuances of the industry, turnarounds can be a tricky proposition for new investors to walk into and master, the source said. 

The bankruptcy hearings are scheduled through August in the U.S. Bankruptcy Court for the Northern District of Texas in Dallas. Proofs of claims are due into the court by Oct. 24. 

Calls to Zelenka Farms, the law firm representing the company, and Insight Equity were not returned before this report went to press. 

Read 6535 times Last modified on Wednesday, 13 July 2016 17:15

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