New York residents who invest in AgFeed Industries may want to take note of the business filing for bankruptcy. The hog producer, which is based in China but has interests in the United States, has filed forChapter 11 bankruptcy. Chapter 11 enables businesses to continue operations while reorganizing and restructuring their debt. Based on the filing, AgFeed has $127 million in assets, but they have $27 million in debt.
One of the issues that led to the company filing for bankruptcy was a contractual dispute with a major hog buyer, Hormel. According to Hormel, AgFeed inflated the price of hogs by overstating production costs. AgFeed countered that Hormel was sending them unhealthy young hogs. In spite of the fact that an arbitrator sided with both parties, Hormel was ultimately awarded $8 million, which was subtracted from what Hormel owed AgFeed. However, disputes with Hormel were only part of the company’s financial difficulties.
It was discovered in 2011, thanks to an internal investigation initiated by the AgFeed’s board of directors, that there were bookkeeping irregularities associated with the company’s Chinese operations. The investigation showed that the company was over-reporting profits by undermining the amount of bad debt owed to the company by farmers who were given feed by AgFeed. Once this was discovered, a class action lawsuit was filed against the company by stockholders.
If a company or small business is struggling with overwhelming debt, they do not have to close their doors. By filing for Chapter 11 bankruptcy, organizations are given the time they need to repay their debts and can take advantage of a structured repayment plan. A lawyer may help a business owner understand what is involved in this process and organize a structured plan to get their company out of debt.
Source: Capital Press, “U.S.-China hog producer files for Chapter 11“, Mateusz Perkowski, July 17, 2013by