A Winnipeg pea and canola protein processor in receivership since this spring remains mothballed for now with no firm buyer — but has paid off one of its three secured creditors.
Merit Functional Foods, which entered receivership March 1 after just two years’ operation, has sold all its remaining finished and raw inventory and directed much of the proceeds toward “full repayment” of its debt to its operating lender, CIBC.
That’s according to the latest report from Merit’s court-appointed receiver, PricewaterhouseCoopers (PwC), which said in its Nov. 14 filing that the sale process it launched March 13 “has not yet led to an executed purchase agreement.”
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PwC’s Nov. 14 report included a supplemental document laying out the details of that sale process so far — but that supplement was ordered sealed in a Nov. 23 ruling by Court of King’s Bench Judge Chris Martin in Winnipeg.
Information in that supplement is “commercially sensitive” and “would cause serious and irreparable harm and prejudice to Merit’s creditors and stakeholders in respect of the disposition of the (Merit) assets,” PwC said in its Nov. 14 filing.
PwC said it doesn’t intend to keep the supplemental document sealed indefinitely, but at least until “such time as a sale transaction for the assets has successfully closed.”
Meanwhile, PwC said Nov. 14, its separate process to sell Merit’s remaining product inventory has yielded about $3.3 million, down from a valuation of $3.8 million estimated back in March.
The receiver said it has also collected about $571,000 of outstanding accounts receivable — about 93 per cent, with the other seven per cent now seen as “likely being uncollectable.”
In its previous report in late March, PwC had said CIBC was owed about $5 million plus interest, fees and other costs. That amount included a cash-collateralized $1.025 million letter of credit the bank had placed with the Canadian Grain Commission (CGC).
PwC had said in March that Merit’s records showed no farmers were still owed money for any crops the processor had in its possession. In its Nov. 14 report, PwC noted the CGC had released its CIBC-issued letter of credit later in March.
As of Nov. 17, PwC said, Merit was estimated to owe CIBC about $4.157 million — including the cash collateral CIBC still held from the CGC letter of credit along with interest and other costs accrued since the receivership took effect March 1.
CIBC, as Merit’s operating lender, had been deemed “first-ranking creditor in respect of accounts receivable and inventory” and was seeking a payment out of those net proceeds, PwC said in its latest report.
Merit’s other secured creditors have approved the use of those proceeds to pay CIBC in full, “in order to reduce the amount of interest and costs continuing to accrue with respect to the CIBC indebtedness.”
Merit had opened for business in early 2021, with major shareholders including Vancouver plant protein firm Burcon NutraScience, U.S. agrifood firm Bunge, and former executives of Hemp Oil Canada.
Burcon had said in April this year it planned to submit a bid for the Merit assets in co-operation with another plant protein company it didn’t name.
Merit’s two remaining secured creditors include Export Development Canada (EDC), which was owed about $58.6 million, and Farm Credit Canada (FCC), owed about $36.4 million — neither total counting interest or other costs that have accrued since March 1.
EDC and FCC were in a consortium of lenders, also including CIBC and Agriculture and Agri-Food Canada (AAFC), that had provided Merit with $95 million in debt financing starting in 2020.
AAFC’s contribution was a 10-year, interest-free $10 million loan from the department’s AgriInnovate program.
— Glacier FarmMedia Network
