Loan called on Legumex’s U.S. canola crusher

Prairie special crop processor Legumex Walker is weighing its options after major lenders to the company’s U.S. canola crushing arm called their loan.

Pacific Coast Canola, a cold-press canola crushing operation at Warden, Wash., about 160 km southwest of Spokane, is 84 per cent owned by TSX-traded, Winnipeg-based Legumex, and 16 per cent owned by commodity giant Glencore.

Legumex announced Friday that PCC has been served notice for demand of repayment of “all amounts due” under its senior credit facility — a total bill estimated at US$54.6 million.

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The notice, citing PCC’s default on the terms of the facility, came from Fargo, N.D.-based AgCountry Farm Credit Services, as the agent for the lenders involved.

PCC was in “active discussions” with AgCountry and is “considering various alternatives,” Legumex said Friday.

The credit facility in question is secured by a first lien on “all assets and undertaking” of PCC, but Legumex said it’s not yet aware what actions AgCountry plans to take.

PCC hasn’t got access to funds to repay the loan in full, Legumex said, and if it can’t refinance the loan, the crusher “will cease its operations” and “would no longer have any equity value.”

Legumex emphasized Friday that PCC’s credit facility isn’t guaranteed by the Winnipeg parent firm or any other Legumex arm. However, Legumex said it recently provided PCC with a US$2 million letter of credit, which it expected AgCountry will draw down.

Legumex also said it doesn’t expect PCC’s default or AgCountry’s demand to affect the parent’s pulse and special crops processing arm, which runs facilities in Manitoba, Saskatchewan, North Dakota, Minnesota and China.

PCC has been a project of Legumex Walker’s since it formed in 2011 from the merger of Saskatchewan’s Walker Seeds and Manitoba’s Roy Legumex. Billed as North America’s largest expeller-pressed canola plant, PCC was built with capacity to crush up to 380,000 tonnes of canola per year.

Getting canola in the U.S. northwest during North America-wide rail congestion later became a problem for the plant, though in fiscal 2014, PCC boosted its full-year crush by 83 per cent from 2013 levels, to 242,300 tonnes.

PCC last year also entered a strategic alliance with grain firm Scoular Co., in which the Omaha company would source canola for PCC and market PCC’s canola oil and meal.

Legumex CEO Joel Horn said in March that PCC is “working to significantly improve its financial performance, when additional non-GMO and local canola seed should be available with the new crop in September.”

Legumex, in a separate release Tuesday, said PCC’s issues won’t affect the parent company’s strategic review, which its board launched in March to “identify and consider strategic and financial alternatives.”

Such possibilities, the company said at the time, could include “strategic financing” from outside investors, a “business combination” such as a merger, or the sale of the company, whole or in parts.

The board’s special review committee “expects to provide an update in the coming weeks as the process nears its completion,” Legumex said Tuesday, but emphasized there’s “no certainty that any transaction or alternative will be undertaken” coming out of the review. — AGCanada.com Network

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