The co-operative behind one of Canada’s biggest names in organic dairy goods is in creditor protection and aiming to negotiate new terms on the eight figures owing to its creditors and members.
Organic Meadow Co-operative announced Monday it had filed for creditor protection “in order to complete a restructuring of its operations.”
The company said its hand was forced by “onerous business terms recently placed upon it” by Dairy Farmers of Ontario, the provincial milk marketing agency.
DFO, in documents filed Tuesday by MNP as Organic Meadow’s insolvency trustee, is listed as an unsecured creditor of Organic Meadow Ltd., owed $850,000.
In a separate statement Monday, DFO said it “had been working with Organic Meadow for a substantial period of time in an effort to assist it with growing its market” but “must also ensure Ontario farmers receive compensation for the milk they produce and sell.”
While the amount owing is unsecured, DFO said it “will ensure that the organic producers are paid for the milk that DFO delivered” and will dip into its bad debt protection fund to cover those payments if need be.
Neither Organic Meadow nor DFO said in their statements what specific terms had changed in their business arrangement. Organic Meadow CEO Don Rees, in the company’s release, said the protection filing “is about protecting the earned rights of the founding farmers of the organic dairy category in Ontario.”
The company, he said, plans to “work with the milk marketing board and all of our creditors to put a restructuring plan in place that allows us to emerge from this process stronger, and which allows us to work with (DFO) in growing the organic milk market we started in 1989.”
The co-op’s dairy farmer members are all “disappointed that we could not find a resolution which would have enabled the co-operative to continue conducting business without the need for creditor protection,” co-operative vice-chairman and organic dairyman Ted Minten said in the same release.
Organic Meadow’s “new business model was beginning to significantly improve our results and we were well along a process to bring in a new investor group,” he said.
However, “substantial milk allocation shortfalls in the December-to-February period and the change to business terms by our largest vendor were impossible hurdles for us to overcome.”
However, Minten said, the company will continue to operate as usual during the restructuring process, and DFO said it “has arranged to supply milk (to Organic Meadow) during the restructuring process.”
Organic Meadow Ltd.’s other major listed creditors include RBC Royal Bank, owed $1.4 million; Ontario dairy firm Elite Dairy, owed over $224,000; Lac-Megantic, Que.-based cheese firm Fromages La Chaudiere, owed over $183,000; and dairy giant Saputo, owed over $129,000.
Another related company, Organic Meadow, Inc., is in protection under the same filing and is listed as owing $9.3 million to an arm of Calgary-based Avrio Capital and $3.21 million to Farm Credit Canada.
Also under the same filing, Organic Meadow Co-operative Inc. is listed as owing almost $700,000 by way of over three dozen “member loans” from parties including individual farmers, farm corporations and Amish colonies, in amounts ranging between $5,000 and $100,000 per loan.
Organic Meadow Inc. is also listed as owing $2.43 million to Organic Meadow Co-operative, while Organic Meadow Ltd. is listed as owing $3.1 million to Organic Meadow Inc. — AGCanada.com Network