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Foreign exchange losses, lender standoff on sale of assets led to receivership, according to W.A. Grain’s largest lender

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A mixture of main losses on international exchange hedging within the preliminary days of the COVID-19 pandemic and an unsuccessful plan to promote assets to draw down debt contributed to Alberta-based pulse and grain crop exporter W.A. Grain & Pulse Options coming into receivership in late April, according to a court docket doc filed by the corporate’s largest lender.

ATB Monetary has filed a 527-page affidavit with supporting paperwork that describes the monetary establishment’s perspective on what went down with the Innisfail, Alta.-based commodity enterprise, which entered receivership on April 26 after having its grain supplier and elevator licenses suspended by the Canadian Grain Fee (CGC) lower than every week earlier.

W.A. Grain and its associated firms personal dealing with and processing services at Bashaw and Bowden, Alta., in addition to at Pambrun, Ponteix, and Vanguard in southwest Saskatchewan.The corporate additionally operates a processing plant at Slemon Park, Prince Edward Island.

ATB says it’s owed $11.9 million by W.A. Grain, whereas Avrio — the corporate’s second largest lender — is owed $8 million. Courtroom paperwork present Farm Credit score Canada can be owed $4.7 million, leading to an estimated whole quantity owing to secured collectors of $24.6 million.

As of Could 9, the CGC has not launched any numbers relating to the quantity owed to farmers, however ATB’s affidavit says it believes W.A. Grain owes $6.5 million for unpaid stock that was delivered earlier than April 23, 2021.

According to ATB, W.A. Grain’s monetary points date again a number of years, however got here to a head with the market volatility and fast depreciation of the Canadian greenback in March 2020 because the COVID-19 pandemic — and associated restrictions — hit the North American market.

W.A. Grain couldn’t afford to make important deposits required by its international exchange hedging corporations, which led three of the corporate’s 4 hedging suppliers to terminate contracts in March and April of 2020. This resulted in realized hedging losses of C$7.6 million and US$1.5 million, says ATB. The lender additionally describes these foreign money positions as “speculative hedges” in breach of the corporate’s mortgage dedication letter. One of the 4 hedging suppliers itself entered chapter in March 2020, leading to an ongoing authorized dispute over cash owed by W.A. Grain.

In September of 2020, ATB says it met with W.A. Grain to develop a debt discount plan, which included the sale of the corporate’s pet meals division at Bowden by December 2020, and the sale of the export facility at Bowden in April 2021.

Nevertheless, it seems this plan has been stalled by a standoff between W.A. Grain’s largest lenders.

ATB says Avrio has mentioned it is not going to consent to the sale of the pet meals division until W.A. Grain pays down 12.5 per cent of its debt to Avrio. ATB, nonetheless, says it’s not ready to permit W.A. Grain to pay down its debt to Avrio “since it would compromise (W.A. Grain’s) working capital and their ability to continue operating as a going concern entity.”

The ATB affidavit additionally features a temporary point out that W.A. Grain’s monetary state of affairs has been damage by “sporadic buyer demand as a result of (shipping) container shortages.”

The corporate was working solely on accounts receivable collections, having reached the utmost restrict on its $7 million working line of credit score, says ATB.

ATB says the record of issues it believes BDO — the court-appoint receiver — ought to do to protect W.A. Grain’s worth consists of doubtlessly closing the sale of the pet meals division with out Avrio’s consent.

In the meantime, the CGC issued new licenses to W.A. Grain efficient Could 1, with situations that the corporate should not obtain or purchase any grain from producers, however permit for the sale of present grain stock below court docket approval.

The CGC says farmers who’re owed cash by the corporate for grain deliveries ought to contact the fee instantly. Producers have 90 days to make a declare after supply or 30 days after a money buy ticket or cheque has been issued to be eligible for compensation below the CGC’s Safeguards for Grain Farmers Program.

RealAgriculture has reached out to W.A. Grain for remark.

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