It’s a mess. That’s about the only way to describe the ongoing dismantling of express grain terminals and those caught up in what looks like its certain demise.
On Monday, the Mississippi Department of Agriculture and Commerce is due to hold a hearing to determine whether the company’s alleged deception was so blatant that the only remedy is to revoke Express Grain’s licenses to operate the grain storage facilities. .
This penalty seems likely. But even if that doesn’t happen, the reprieve will likely only be for a few days. Consultants hired to try to restructure the business in preparation for a hopeful sale have officially told employees to prepare for a permanent shutdown which will begin on January 28 and take about a month. They seem to have little hope that a lender is willing to invest enough working capital in Express Grain to make it work.
So much of what is happening now is a maneuver by creditors – banks, farmers and others – to see who can get as close to the front line as possible to cut their losses when the business is sold. or liquidated and the federal bankruptcy court distributes the proceeds.
Farmers who lost tens of millions of dollars for grain they delivered last harvest season but weren’t paid for have two hopes.
The first is that the financial institutions that provided the agricultural loans to plant and grow the crops will prevail in their argument that their liens on that grain or its product supersede that of UMB Bank, Express Grain’s largest creditor.
The other is that Lexington trial attorney Don Barrett and his colleagues can prove that UMB Bank knowingly supported a failing company only long enough for it to collect grain from the 2021 crop, so that when the bank seized, they could seize that grain. as security for the outstanding loan balance of $70 million.
Express Grain’s duplicity has been documented by multiple sources. There are those rosy emails last year about the future of the business, including one from John Coleman, the company’s chairman, that Express Grain was ‘in good financial shape’ the day before it was filed. balance sheet. UMB Bank shows that the company grossly overestimated the amount of grain it had last year, which allowed the borrower to tap into more money from the bank than he could have had other. And then there’s the seemingly doctored financial audit that Express Grain submitted to the Department of Agriculture when the company applied to renew its warehouse licenses last spring. It’s a work of extreme fiction, depicting a business that was still profitable and with substantial net worth when, in fact, the truth was the opposite.
If anything results in criminal charges, it will be this report.
Whoever changed the numbers and removed some of the auditors’ warnings didn’t want state regulators and possibly the bank to see that an independent assessment of the company indicated it was on the brink of failure. .
Express Grain’s expansion into biodiesel at its soybean processing plant in Greenwood had apparently been a big mistake. After the biodiesel operation went live in early 2019, it had to be idle for nine months to resolve issues. He couldn’t reach his full capacity and was losing money. Auditors said the deal was unlikely to succeed, and if the company tried to sell the biodiesel plant, it wouldn’t come close to what it put into it. The result was a $13 million write-down in the 2020 audit, an accounting adjustment that contributed to an operating loss of $21 million on the books, compared to a profit of $10 million last year. last year.
The most lenient explanation for Express Grain’s deception was that it was desperate. He was trying to save the company and the jobs of the approximately 150 employees who depended on it for their livelihood. She knew that without a warehouse license, she had nothing to do. And he knew that if farmers thought there was a chance they wouldn’t get paid, they would have taken their soybeans and corn elsewhere.
He had to put up a front – the “fake until you make it” strategy – in order to maintain the confidence of his creditors until the company’s fortunes turned.
The problem with this strategy – besides the risk of turning into a fraud – is that if it doesn’t work, a lot of people end up with the bag. And they’re likely to be furious, rightly thinking they’ve been misled and scammed.
What seemed like a great local success story not so long ago has turned into a sad, angry and disappointing story.
– Contact Tim Kalich at 662-581-7243 or [email protected]