Area farmers seek answers on VeraSun
Attorney General’s office helps sort legal issuesBy DARCY DOUGHERTY MAULSBY, Messenger correspondent
Article Photos
Fact Box
For VeraSun answers
-VeraSun's law firm has designated one of its attorneys in Chicago, Lisa Diaz, to answer questions from farmers regarding contracts for future delivery. To reach Diaz, call (312) 407-0588. Due to the volume of calls she is handling, an immediate response may not be possible, said Steve Moline with the Iowa Attorney General's office.
-Questions about Iowa's Grain Depositors and Sellers Indemnity Fund can be directed to Richard Wahl, director of the Grain Warehouse Bureau for the Iowa Department of Agriculture and Land Stewardship, at 281-5987.
- If VeraSun is not meeting its obligations to pay producers in a timely manner, contact Steve Moline with the Iowa Attorney General's office at 281-6634 or smoline@ag.state.ia.us.
CLARE - In the wake of the VeraSun bankruptcy, nearly 80 farmers who gathered at the community center in Clare on Dec. 9 didn't always find the answers they wanted to hear from the Iowa Attorney General's office.
''It's nerve-wracking,'' said Donna Ricklefs, who farms with her husband, Dennis, near Rolfe. ''We had contracted grain with VeraSun for December 2008, and we made plans for the money we thought we were going to receive. Now (this bankruptcy) has happened, and there's a lot of uncertainty.''
VeraSun is currently evaluating its contracts for future delivery, and the company has the right to reject those contracts, said Steve Moline with the Iowa Attorney General's office. ''These contracts have generated confusion, and it's a moving-target phenomenon.''
Finding more
information
VeraSun filed for Chapter 11 bankruptcy in the U.S. Bankruptcy Court for the District of Delaware on Oct. 31. Since separate cases were filed for each VeraSun facility, there are five separate cases involving VeraSun facilities in Iowa, although the cases are being jointly administered. VeraSun's post-petition financing is complicated by its need to negotiate separate financing agreements. In certain cases, a line of credit allowed some facilities, including the one at Fort Dodge, to keep operating, while other plants, such as Dyersville, ceased operations.
Shortly after filing Chapter 11, VeraSun obtained court approval to use a portion of its post-petition financing to pay for corn it bought within 20 days of its filing.
''We are not aware of any producers who fit within this window who have not been paid,'' said Moline, who noted that although VeraSun's book losses in late June and early July totaled $103 million, the latest figure was closer to $400 million.
The present status of contracts for future delivery was established by the Delaware Bankruptcy Court on Dec. 2. Contracts for future delivery that VeraSun had at its non-operating plants were rejected.
As VeraSun evaluates its remaining contacts for future delivery, VeraSun can reject a contract by serving notice on the contract holder via e-mail, fax, overnight delivery or hand delivery. Rejection without further order of the court becomes effective 10 days after the service of the rejection notice, Moline said. Objections to a rejection must be filed prior to the expiration of the 10-day notice period.
''Farmers who have contracts for future delivery should contact the local facility grain merchandiser and try to get as much information as possible,'' said Moline, who noted that VeraSun's law firm has designated Lisa Diaz, one of its attorneys in Chicago, to answer these questions. She can be reached at (312) 407-0588.
''You need to be able to verify that you won't be required to deliver grain to VeraSun, because you just can't assume anything,'' Moline said.
Understand the Grain Indemnity Fund
In light of the VeraSun bankruptcy, farmers have been seeking answers regarding the Iowa Grain Depositors and Sellers Indemnity Fund. The fund provides a source of security against loss for producers who have sold or stored grain with an Iowa-licensed grain dealer and/or an Iowa-licensed grain warehouse. Moline noted that four of the five VeraSun plants in Iowa are Iowa-licensed grain dealers, except for the Albert City facility, which buys grain from other dealers rather than producers.
With more than $8 million available, the Indemnity Fund covers losses at 90 percent of the value of the loss, with a cap on coverage of $150,000 per claimant. While the Indemnity Fund is very liquid, claims will be paid on a first-in, first-out basis if the fund drops to zero due to numerous claims.
Claims have to be filed within 120 days of an incurrence date, which is Feb. 28 in the VeraSun case.
''Since VeraSun filed Chapter 11, it's possible there may be more than one incurrence date in this matter,'' Moline said. ''For example, a suspension or revocation of a VeraSun facility's Iowa grain dealer license would trigger a new incurrence date.''
Moline stressed that the Indemnity Fund does not cover grain sold to a licensed grain dealer until the grain has been delivered. In addition, the Indemnity Fund does not cover grain sold using credit-sale contracts.
''Based on what we know, nobody has a credit-sale contract that would be exposed by the bankruptcy of VeraSun,'' Moline said.
It's important to understand how the Indemnity Fund views an agreement where a producer delivers grain and receives a payment of less than the full contract price. Moline cited the example of a producer who has a contract to deliver corn to a dealer for $6 per bushel in December 2009. When the producer attempts to deliver the corn in December, the dealer informs the producer that it will only pay $4 per bushel for the corn. If the producer decides to go through with the delivery and take the $4 price, the Indemnity Fund will generally view this as a renegotiation or cancellation of the contract, reducing the price to be paid to $4 per bushel.
''In this case, the fund would deny any attempt by the producer to seek fund coverage for the $2 difference,'' Moline said.
For farmers who have considered filing for an unsecured claim against VeraSun, the odds aren't good, Moline added.
''I don't want to discourage anyone from filing, but in my experience with this kind of insolvency, the money available for unsecured creditors is usually zero.''
Contact Darcy Dougherty Maulsby at (515) 573-2141 or yettergirl@yahoo.com.
