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Investment company: Quick beef plant sale needed

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SIOUX FALLS (AP) -- An investment company that loaned a troubled South Dakota beef plant $35 million last September says Northern Beef Packers has no cash and a quick sale is needed to preserve the value of the state-of-the-art facility.

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The Aberdeen plant filed for protection under Chapter 11 last month. The bankruptcy court in Sioux Falls will look at the company's plan to obtain credit to move forward with a sale or restructuring during a hearing scheduled for Thursday morning.

In a memo filed Wednesday, White Oak Global Advisors attorney Roger Damgaard said the plant needs money to pay security guards and a skeleton staff of essential employees and assist with the bankruptcy case.

"The Debtor is not operating and has no cash," Damgaard wrote. "The Debtor's primary asset, the Aberdeen beef processing facility, currently sits idle and is in dire need of funding to pay critical post-petition expenses necessary to preserve value."

Once locally owned, Northern Beef Packers is 41 percent owned by businessman Oshik Song with 69 other Korean investors who each gave at least $500,000 under the federal EB-5 program that encourages foreign investment in exchange for qualifications to secure permanent residency.

Land for the $109 million plant was first secured in 2006, but the company wasn't able to slaughter its first animal until late in 2012 and has since struggled to raise the operating funds to ramp up to full capacity.

Now, with $138.8 million in liabilities and just $79.3 million in assets, according to court documents, the plant has laid off most of its employees and is trying to figure out how it can restructure to resume production or sell.

Dennis Hellwig, an Aberdeen livestock businessman who was once Northern Beef's largest investor, sold his interest about four years ago. But he said a plant processing 1,500 head per day is still needed in the region to serve cattle ranchers in the Dakotas, Nebraska, Iowa, Minnesota.

"It's the right deal, it just has to get financed with enough money," Hellwig said. "Somebody will come along with the right program, but they need to change some stuff down there."

Hellwig invested in Northern Beef Packers in 2006 in response to then Gov. Mike Rounds' South Dakota Certified Beef initiative. Rounds hoped to get the state's ranchers premium prices by allowing consumers to track animals from birth, through a feedlot and to a meatpacking plant.

But just as construction of the plant was about to begin, local opponents forced a public referendum on the TIF bond plan. Voters gave their thumbs up, but then heavy spring rains brought severe flooding, prompting more delays.

Northern Beef Packers meanwhile used EB-5 to attract investors and spur the start of construction, and Hellwig stepped down as general partner when the Korean investors asked to buy out his shares.

The new owners recruited another round of EB-5 investors, but the new investment fund provided loan money instead of equity shares in the company. Northern Beef eventually began to ramp up production earlier this year to about 200 head a day -- far short of the 1,500 capacity -- after obtaining additional financing.

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