PORTER – Porter Elevator, Inc. filed for Chapter 7 bankruptcy late last week following its voluntary closure Dec. 10. The company’s bankruptcy petition shows the Porter Elevator has roughly $3.6 million in assets and $4.2 million in liabilities. More than $1 million of its liabilities are considered unsecured claims, leaving many unsure of how, or if, they will be repaid.

The closure of the Porter Elevator leaves numerous jobs, unpaid bills, bounced sales checks and tens of thousands of bushels of grain in limbo. With the company’s bankruptcy filing, its secured creditors will be paid first, leaving dozens of farmers, vendors and past employees without a confirmed payment.

Chapter 7 bankruptcy liquidates a company’s assets to pay its obligations. Exemptions are not available in a business bankruptcy, and all assets of the corporation will be sold and proceeds distributed among its creditors according to priority.

Of the elevator’s $4.2 million worth of liabilities, $3.1 million (or roughly 75 percent) are owed to secured creditors, like banks with lines of credit, mortgages and loans. After assets are liquidated, an estimated $500,000 will remain to pay just half the $1 million-plus priority unsecured claims and most likely leave the remaining $100,000 in non-priority unsecured claims unpaid.

It is unknown at this point what will happen to grain stored at the elevator or how, and if, deferred payment contracts will be handled. During an informational meeting last week, attorney Kevin Stroup said that if the elevator’s deferred contracts do not meet state statutes, those farmers could also join the list of unsecured creditors, making what are already nickels-on-the dollar payments to unsecured claims smaller.

Executory contracts and unexpired leases include at least 90 deferred payment contracts whose total amount, priority and legality are unknown at this time.

Stroup also said stored grain that was delivered to the elevator and not sold in any fashion is still owned by the person who delivered it. But in instances like this, regulators with the USDA sometimes sell the bulk grain and distribute payments to farmers with stored grain.

The bankruptcy petition said Porter Elevator currently holds or controls property for 89 individuals that the elevator does not own – including any property borrowed from, being stored for, or held intrust and not including leased or rented property.

Porter Elevator President Bruce Tetrick filed the bankruptcy petition with his lawyer, Michael McGrath, from Minneapolis on Wednesday evening. The petition estimates that after any administrative expenses are paid, that no funds will be available to unsecured creditors. In the petition, it is also noted that property involved in the bankruptcy is in need of immediate attention because perishable goods are involved.

The elevator reported gross revenues of $18.8 million in 2014 and $22 million in 2013.

Tetrick, the elevator’s president, reported earning $78K within the past year before the bankruptcy filing.

Assets

The bulk of the elevator’s $3.6 million worth of assets resides in its $1.75 million worth of agriculture-related assets. It has roughly $950K in accounts receiveable and $385K in non-agricultural machinery, equipment and vehicles. Some of the elevators specific assets include:

$1.4K cash – the elevator has four checking accounts, and all are at a zero balance except for an account with MinnWest Bank in Marshall that holds a positive balance of $1,400

$947K in accounts receiveable – all accounts are less than 91 days old and none of them are considered doubtful or uncollectable accounts according to the elevator’s bankruptcy petition

$650K worth of grain – roughly 175K bushels of corn, 5K bushels of soybeans, 21K bushels of oats and 4K bushels of spring wheat

$315K in livestock – the estimated value of the company’s 200 head of Holstein cattle

$750K in farm machinery and equipment – including tractors, augers, grain dryers, feed mill bins and corn bunkers

$5.5K in office equipment – including computers, monitors, printers, chairs and desks

$385K worth of non-farm designated trailers, semi trucks and vehicles – including an 2015 grain hauling trailer valued at $80K, a 2014 Ford pickup valued at $45K and a 2013 Cadillac CTS valued at $25K

$513K in real property – the estimated tax value of property that the elevator sits on and any permanent structures

$23K in all other assets – including a skidloader, a snowmobile trailer and two golf carts

Liabilities

Nearly $3.15 million of the elevator’s liabilities are from creditors with claims secured by property. They include:

$1.9 million-plus loan/line of credit from First Security Bank in Sleepy Eye secured by the elevator’s accounts receivable, equipment, inventory and vehicles with a market value of $2 million-plus

$600K first mortgage from the State Bank of Taunton secured by the elevator’s real property valued at $513K

$180K second mortgage from the State Bank of Taunton secured by the elevator’s real property valued at $513K

$267K loan from MinnWest Bank in Marshall incurred August 2015 and secured by 200 head of Holstein steers valued at $315K

$90K loan from Western Equipment Finance incurred August 2013 and secured by the elevator’s corn bunker and leased equipment of the same value

$46K loan from the Upper Minnesota Regional Development Commission incurred August 2011 and secured by the elevator’s real property valued at $513,K

$24K loan from Huntington National Bank secured by a 2013 Cadillac CTS valued at $25K

$8.9K loan/grant from City of Porter incurred July 2013 and secured by the elevator’s real property valued at $513K

$6.3K loan from Ford Motor Credit secured by a 2014 Ford F350 Pickup valued at $45K

$5.1K loan/grant from City of Porter incurred October 2011 and secured by the elevator’s real property valued at $513K

Unsecured Debts

Probably most worrisome in the whole ordeal is the long list of unsecured creditors that includes farmers who sold grain, unpaid employees and vendors who have not been compensated. The elevator owes more than $1.1 million to unsecured creditors; $1 million worth of those unsecured claims are listed as priority unsecured claims, while the remaining $102K are listed as nonpriority unsecured claims. Priority unsecured creditors include:

$7.7K in unpaid wages to nine employees, all of whom will be paid under priority

$2.8K in unpaid state and federal payroll taxes, of which all will be paid under priority

$415K in unpaid or bounced grain checks, of which only $51K will be paid under priority with the maximum payment to one entity not exceeding $6,150

$582K in unpaid deferred payments, of which $21K will be paid under priority with the maximum payment to one entity not exceeding $6,150

$102K in unpaid bills for goods and services labeled as nonpriority unsecured claims