Borden Files Chapter 11; Moves to Protect Farmer Payments for Pre-Petition Milk; Interim Motion Approved on Jan. 8th

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UPDATE: Jan. 9th:  The Court issued an Order, posted late on Jan. 8th, which did indeed authorize Borden to pay independent farmers and co-ops, but there is some leeway as to the amount those producers and handlers might be paid.  Independent producers especially are encouraged to read the full 7 pgs. of the Order found here (you may also download and print), and perhaps consult with an attorney for interpretation and clarification.  Some situations may differ per state laws and milk bonding statutes.

Dave Natzke, Progressive Dairyman, has also published a report of the hearing with added information from the courtroom, which may be read here.

 

Borden Dairy Company, et al.,  now becomes the 2nd major dairy company within two months to file for Chapter 11 Bankruptcy to reorganize their financial structure.  Dean Foods, the nation’s largest processor of fluid milk, filed for Chapter 11 protection in November.

The Borden Chapter 11 filing caught many grass-roots dairy farmers off guard, especially due to renewed optimism due to recent new product introductions under the leadership of Tony Sarsam.

Progressive Dairy published an informative report written by Dave Natzke, Editor.

Borden Dairy  issued the following press release about the filing, which can also be accessed on the web:

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When a milk-purchasing company announces bankruptcy, the first question that grass-roots farmers and rural communities is concerned with is “Will those farmers get paid for ‘pre-petition’ milk?”  (That is the milk delivered in the period prior to the filing for which the farmer has not received payment.)   Payment for milk delivered from the day of filing forward is generally protected by the Court.

Normally, independent farmers, those who sell milk directly to a plant or company, and who are not members of a milk cooperative, are left holding the bag, and don’t get paid, because they are generally considered ‘unsecured creditors.’  Some states, but not all, have ‘milk bonding’ statutes, which protect payments to farmers to some degree; some states may protect payment for all or a significant portion of the milk delivered, while others may have bonding statutes which cover only a tiny portion.

In this Borden Dairy Chapter 11 process, the company has filed a Motion with the Court to ask that the Company be allowed to complete those payments to those independent farmers and five milk cooperatives. This Motion was scheduled to be heard as part of the “First Day Hearings” on January 7th, but at the writing of this blogpost, (midnigh/early am, Jan 8th) an Order has not been entered which will actually permit that to happen.  An Order must be entered on the Court’s Docket which will finalize payment.

The documents below, on page 3, paragraphs 7 and 8, note that Borden purchases raw milk from ‘approximately 262 independent family dairy farms’ and ‘five farmers’ cooperatives; collectively, those farmers and cooperatives are called ‘Milk Vendors.’  They also detail the normal times of payment.

The Borden Chapter 11 proceeding is legally known as Case 20-10010-CSS, and is being heard in the United States Bankruptcy Court for the District of Delaware.    Below are the 7 pages of Document 11 in the above captioned case, titled “Declaration of Jason Monaco in Support of Debtors’ Motion for Authorization to Pay Critical Vendors,” which is the Motion asking for payment to farmers.

Affected parties residing in or operating farms in the states of Mississippi or Texas likely need to pay special attention to a Footnote (3)  at the bottom of Page 3. Such parties may need to have this Document 1, along with other documents in this case reviewed by an attorney for interpretation, and have such a qualified attorney determine how this footnote may affect their farming operations.

NOTE:  The author of this blog is not an attorney, and any information posted SHOULD NOT be considered legal advice, only observations. These public documents are posted for information purposes only; it will be up to individual farms affected in this matter to consult attorneys to review their legal rights.

 

Here are the pages of Document 11, the Motion requesting payment to farmers:

 

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Any updates of significant events and/or official rulings by the Court will be added or noted when they are available, as will additional information related to this process.

NOTE:  The AUTHOR of this blog IS NOT AN ATTORNEY, and any information posted SHOULD NOT be considered legal advice. These public documents are posted for information purposes only; it will be up to individual farms affected in this matter to consult attorneys to review their legal rights per their individual situations.  The author has experienced a milk company bankruptcy as a producer, so therefore is familiar with the process from a farmer/producer perspective

 

ON A PERSONAL NOTE:  As Borden now joins Dean Foods in Chapter 11 proceedings, this is the second Financial Reorganization/Bankruptcy filing of a major purchaser of fluid milk in the United States within two months.  Many, many family farms will be affected to some degree by these proceedings, no matter if a farm is an ‘independent’ or a member of a cooperative. In turn, the rural communities across the country in which those farms are located will be affected as well.  May I ask that anyone who is a Believer in a Higher Power please join me in keeping the entire US Dairy Farm industry in your collective prayers?  Thank you for doing that!

May God Bless our Dairy Farms, and our Farming Communities!!

 

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