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Sunday, 03 December 2017 20:52

Spiech Farms files for bankruptcy after two troubled harvests in 2017

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PAW PAW — A Southwest Michigan-based provider of fresh and frozen blueberries, asparagus and grapes has filed for Chapter 11 bankruptcy protection in the U.S. District Court for the Western District of Michigan.

In court filings, Spiech Farms LLC of Paw Paw, Mich. in Van Buren County said gross sales fell from approximately $15.8 million in 2016 to $11.8 million this year. The financial troubles stemmed from a near total loss of the blueberry crop at the farm’s Georgia operations, and the loss of about 60 percent of its grape crop in Michigan after a late-season freeze, owner Timothy Spiech said in the court documents.

Spiech Farms packages and sells fruits for grocers nationwide, including Meijer Inc., Wal-Mart, Kroger, SpartanNash Co. and Whole Foods. The company claims to produce more than 80 percent of the fresh market concord grapes for the domestic market.

The company estimated its assets and liabilities between $1 million to $10 million each, and put its list of creditors between 200 and 999 entities. It employs between 100 and 150 people with a payroll of $3.25 million so far this year, according to court documents.

On Nov. 27, Judge John Gregg approved Spiech Farms to operate as the debtor in possession of the company during the court proceedings. Spiech Farms requested cash collateral to “continue its operations, purchase material, (and) meet its payroll,” according to the filings.

The company is being advised in the proceedings by Rayman & Knight, a Kalamazoo-based law firm.

Attorney Cody Knight said in a statement to MiBiz that the company wants to restructure its farming operations to better position itself for the future. He called Chapter 11 the “best path forward” for Spiech Farms.

“Spiech Farms is confident that the Chapter 11 process will allow it to reorganize and remain a strong provider of agricultural products to its customers throughout the United States,” Knight said.

In the bankruptcy filing, Spiech Farms lists its largest secured creditor as Midland-based Chemical Bank, which is owed $4.95 million for lines of credit, real estate and equipment loans.

Additionally, Spiech Farms lists 20 unsecured creditors owed more than $1.8 million. They include Produce Pay Inc. of Los Angeles ($453,591.50), Riverside, Mich.-based Monte Package Co. ($226,447.86), Ran-Mark Co. of Hart, Mich. ($202,172.93), Hart-based Golden Hart Fruit Farms ($135,991), New Jersey-based Frank Donio Inc. ($135,780), according to the filings.

The list of unsecured creditors also include other local companies, including Malburg Acres LLC of Hart, Lawrence-based Lawrence Freezer Corp., Hart-based Herrygers Farms LLC, Mears-based B&W Orchards, Mount Pleasant-based TTS Logistics Transit Transportation Service, Shelby-based Lakeshore Farms, Hart-based Sloccum Farms, Bronson-based Mayer’s Great Lakes Hydrop., Hart-based LK Vansickle Farms LLC, and Kalamazoo-based Shawn Craft PC.

The company said four firms — Leaf Capital Funding LLC, CHS Capital LLC, Produce Pay Inc. and Monte Packaging Inc. — have claimed liens against the company, each of which Spiech Farms disputes.

Additionally, Spiech Farms said four fruit farmers could have claims totalling $119,657.04 against the company under the federal Perishable Agricultural Commodities Act.

The bankruptcy filing comes just months after the Michigan Economic Development Corp. awarded the company a $220,000 performance-based grant to support its a more than $1 million expansion project at its Paw Paw production facility, as MiBiz previously reported. The company has farming operations in Michigan, Georgia and Florida.

CHALLENGING LIENS

In a separate complaint, Spiech Farms claims that creditor Produce Pay Inc., a provider of alternative financing for produce growers and distributors, does not have a right to claim a lien on all of the operation’s assets.

Spiech Farms secured a $1.1 million loan from the provider to help with the grape harvest this fall, according to court filings. Spiech Farms said it still owed more than $460,000 to Produce Pay, but alleged its loan from Produce Pay was simply a financing agreement and did not entitle the company to a security interest.

Spiech Farms said it transferred $640,037.10 to Produce Pay after the farm fell into insolvency and within 90 days of the bankruptcy filing. In the complaint, Spiech Farms asked the court to force Produce Pay to repay the sum, plus costs and interests, calling them preferential transfers.

“The Transfers enabled the Defendant [Produce Pay] to receive more than it would have received” if Spiech Farms had instead filed for liquidation in the case and the transfers had not been made, according to the complaint.

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