Friday, December 24, 2021

Commish Moves to Block Express Grain Loan

 A bankrupt Express Grain Terminals wants to borrow $30 million to stay afloat but will continue to go a begging if Agriculture Commissioner Andy Gipson has his way and shuts down the company.

 Express Grain filed a motion Monday seeking approval for a $30.3 million loan. The company says it needs a loan so it can pay farmers when they deliver their crops to the grain elevator and continue operations and continue operations. For some strange reason, farmers are demanding payment upon delivery.  The loan will be issued by none other than UMB Bank.

The company admits it does not have enough money to stay in business if it does not get the loan. Express Grain justified the post – bankruptcy petition financing:

44.       Debtors have continued  in the operation  of its businesses since the Petition Date Debtors must have financing  to continue  to purchase  inventory,  and to pay  employee,  rent and utility expenses. Additionally, financing will allow the Debtors to immediately purchase soybeans to use in their crush operation, which will not only  benefit farmers on a post-petition  basis, but also alleviate  the need to use the pre-petition  bean supply.   Debtors'  cash  position is such that, without the availability  of immediate additional capital, Debtors cannot meet operating expenses necessary to achieve these objections.   Termination  of Debtors'  operations would jeopardize the sale  process,  injure  all  of  Debtors'   creditors,  both  unsecured  and  secured,  and  could  cost approximately  several  hundred employees  their jobs. Accordingly,  Debtors submit that the DIP Facility reflects the exercise of its sound business judgment.
Express Grain attorney Craig Geno asked for an expedited hearing. 

However, Agriculture Commissioner Andy Gipson channeled his inner Lee Corso and said not so fast, my friend as h should e filed a motion two days later to block the loan. The seven pages of legal mumbo – jumbo boils down to one simple argument.  The Commissioner said Express Grain submitted fraudulent financial statements to the state when renewing its license. Commissioner Gipson intends to revoke the license. Without a license, the company is out of business.

The objection states:

a.         The proposed DIP Facility with UMB is to “allow” the Business Debtors increased liquidity in order to purchase soybeans on an immediate post-petition basis. Without the Licenses, the Business Debtors will not be going concerns and the DIP Facility is not necessary.

b.         Without Licenses, the Business Debtors cannot purchase/sell pre- or post-petition beans, corn and other grain.

The Court was supposed to hear arguments on the motion for the loan this week but postponed the hearing when the Commissioner filed his objection. Bankruptcy Judge Selene Maddox set a hearing on the objection to the loan for January 6, 2022. A hearing for approving the loan will be held the next day.



 Express Grain Terminals opened in 2007 and is a major grain elevator in the Mississippi Delta. Dr. Michael Coleman and his son John Coleman own Express Grain Terminals although John's share is 1%.  Express Processing open in 2015 and Express Biodiesel opened in 2018. Express Grain owns the two companies.

Express Grain ran into some financial trouble a year ago. Several farmers complained to MDAC in December 2020 that checks for their harvest bounced. However, the company made good on the checks. However, the company owed over $70 million to UMB Bank. The company submitted phony financial statements to the state when it renewed its license in the spring of 2021. Word circulated among Delta farmers during the harvest season that the company was in trouble. 

Express Grain President John Coleman assured farmers everything was okay in a September 28 letter:

UMB Bank sued the company for fraud on the same day in Leflore County Chancery Court.  UMB had issued a $40 million revolving loan and a $35 million term loan to the defendants. The bank extended the loans several times. The bank allegedly caught the company submitting false financial statements. UMB declared Express Grain in default on loans of $71 million. The lawsuit sought repayment of the loans and asked the Chancellor to place the company into receivership. Earlier post. 

Express Grain filed a petition for Chapter 11 bankruptcy the next day. 

 The company reports total liabilities of $106 million in assets of $101 million. However, the company owes another $9 million to farmers. The secured claims are $70 million while unsecured claims are $36 million.  Total amount owed to farmers is $41 million.  The top twenty unsecured creditors report  claims of over $23 million. 

 The damage does not stop with farmers losing their crops. More than a few banks place liens on harvests when farmers borrowed against them. The bankruptcy means those banks could lose the collateral on those loans.

Some farmers have gone to court to get their harvests back. They accused the bank of keeping the broke borrower afloat just long enough to steal the harvests delivered to the grain elevator without paying for them Earlier post. 

 Commissioner Gipson said Express Grain submitted phony financial statements when it applied for the renewal of its license. He obtained copies of the audited financial statements for the last three years from the company's accountant, Horne LLP, and compared them to those filed with his agency. The Commissioner said the true audits show the company was suffering a $20 million loss while those filed with his office showed a thriving company. The auditors also stated in their notes that it was doubtful the company could continue "as a going concern." 

The Commissioner asked the Court's permission to investigate the company and made it clear he wants to revoke Express Grain's license.

Note: The motion and objection are posted below.


Anonymous said...

Completely inept business skills by the people running this company. And why UMB bank thinks they would ever recover an additional loan when the debtors are already in default on the original loan is beyond me. The bankers already know the business model has failed. Sounds like fishy stuff going on between the debtors and the bank.

Anonymous said...

I will say this emphatically: If Express Grain in any way, shape, form, or fashion submitted false, fraudulent, or altered financials to their lender, customers, or the state Ag Commission, then they should be shut down immediately and permanently.

Anonymous said...

This is moving far faster and farther than Lee O. Sanderlin's ability to keep up.

What Could Go Wrong said...

This is like obtaining a second or third credit card to pay down the previous cards.

Anonymous said...

The bank knows other lenders can likely qualify to lend funds to the grain company….ahead of the bank.

The prior lenders can be cut out (to a degree) and the new debt takes priority over old debts.

That’s probably why the original bank is keen to loan more money at this stage….in for 100 million in for 30 more.

Now Andy is a goof ball but one strange thing about him? He’s actually a pretty fine lawyer in more high brow areas… this.

Is the harm Andy could cause worth it? Farmers could recoup losses under a new biz plan…..but if Andy sinks the ship….nada.

Anonymous said...

Maybe they have some hidden collateral? Agree that should already be shut down or license suspended at the least.

Anonymous said...

I don’t understand why this Means anything to anyone with a functioning brain.

Anonymous said...

I agree with 10:23 AM…as my dad always preached “you can’t borrow yourself out of debt”.

Kingfish said...

Harm? So if the company committed blatant fraud he should look the other way?

Anonymous said...

Some of you have no idea how bankruptcy works. A DIP loan is the best path for farmers to recoup anything for their crops.

Anonymous said...

Express Grain’s theory (for what’s it worth they are probably right) is that the business can produce more value for a liquidation (or a sale) if they get as many beans in as possible for processing. They actually can create value that way. If they can get the loan, the prepetition farmers have a better chance of getting paid upon liquidation.

I don’t remember the specific amount per bushel they make after processing, but it’s significant.

This is what should’ve happened in the first place. Within a week after the petition was filed, a post petition LOC should’ve been put into place. They have lost millions (ultimately the farmers)because they didn’t handle it right.

Anonymous said...

There are a lot of people on the thread here that don't understand the terms of DIP financing, evidently. It isn't "borrowing your way out of debt." The bank will provide the financing because they will become first in line for payment, and the rate and fees will be extraordinary. The lender will make a lot of money and will have a very high likelihood of being repaid.

Anonymous said...

Do the farmers have any right to full disclosure in their contracts? Would they have standing to litigate? Seems like some kind of deceptive practice for sure.

Anonymous said...

A fool and his money will soon part ways! Old saying has a lot of meaning!

Please, Santa..Don't Lay My Daddy Off! said...

Politicians often use the phrase "It's for the children". That has such an emotional impact, doesn't it. "We're only doing this for the children". "We are allowing the border crossings because of the children". "No child left behind". "She should be granted a reduced sentence because of the four children under age five". "Allow the man probation so he can work and support his children".

Likewise, corrupt businesses use terms such as "It's for the farmers" and "It's for the 100 employees who could lose their jobs".

Fraud, corruption and thievery have their ramifications, don't they? Any court that has shit for sense, ethics and sound legal principles will immediately toss this attorneys curve-ball (and fine him a hundred bucks for filing it).

Anonymous said...

@2:51 PM

Anonymous said...

What lending institution would be fool enough to loan them any money when they are in bankruptcy?

Anonymous said...

7:10, one that understands finance and the law. DIP is a lucrative industry. The lender is basically guaranteed to make money.

Anonymous said...

8:02 - Who in God's Holy Name gives a shit about the lender making money? Sure DIP will put the lender (bank) first in line for the money grab. Most living, breathing souls are more interested in the people who are getting screwed out of a years' investment...not the people who are erecting new brick buildings on every damned corner in town.

So, it boils down to this: Does the farmer covet a dollar return for every ten dollars invested or does he want to roll the dice for A dollar-ten-cents? It ain't a matter of penetration's simply a matter of lubricant. Either way....well, you know the rest.

Anonymous said...

Gibsons and idiot looking for headlines. Debtor in Possession financing has a long history and is often used to protect the remaining assets. Stay in your lane cowboy.

Anonymous said...

Hesitant to ask, since some are prone to snarky replies, but is not the proposed post-petition lender the same one which claimed fraud? if so, does the lender agree to settle its claim as part of the DIP financing agreement?

Anonymous said...

Ponzi schemes do not qualify for Debtor in Possession loans.

Anonymous said...

@2:55, in two words, yes, no.

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