Agribusiness  November 19, 2010

Johnson Dairy to emerge from bankruptcy

johEATON – A dairy that was once one of the biggest and fastest-growing in the state may be on its way to emerging from Chapter 11 bankruptcy protection.

Johnson Dairy, located about five miles east of Eaton and owned by John D. Johnson, declared debts totaling more than $50 million in its bankruptcy filing in January 2009. About $50 million in claims were dismissed in November 2009 in a settlement reached with the Federal Deposit Insurance Corp., which took over New Frontier Bank after it failed in April 2009.

But Johnson and the dairy still owed more than $6 million in claims by unsecured creditors and faced a $12.6 million claim by Minnesota-based AgStar Financial Services for a loan Johnson Dairy alleged it was forced to take to get needed capital from NFB.

The dairy’s Third Amended and Restated Joint Plan of Reorganization filed Sept. 24 and confirmed by Judge Sidney Brooks on Oct. 27 outlines a plan to pay off its creditors. The judge also signed an order approving a motion filed by Johnson and his attorneys on Oct. 12 that describes how remaining debts will be settled.

The financing plan hinges on a loan from Twin Falls-based McFinney Agri-Finance LLC to cover the AgStar loan and provide $3 million in payments to be divided among unsecured creditors. The agreement puts up as collateral nine parcels of Johnson-owned land, equipment at the dairy that includes a state-of-the-art double-80 milking barn and homes on the site, and 39 shares of water rights in local ditch and irrigation companies.

Bankruptcy conditions met

In his Oct. 27 order, Judge Brooks noted that “the debtors have complied with all applicable provisions of Chapter 11 of the Bankruptcy Code” and that “each holder of a claim or interest has accepted the plan or will receive or retain under the plan property of value, as of the effective date of the plan, that is not less than the amount that such holder would receive or retain if the debtors were liquidated under Chapter 7 of the code.”

The document concludes that “the debtors are hereby released and discharged from all dischargeable debts.”

The order also requires that “the debtors shall file a notice in the court to inform parties if and when the effective date of the (reorganization) plan occurs.”

When that will happen is uncertain. Johnson’s Denver-based attorneys, Jeffrey Weinman and Lee Kutner, did not respond to telephone calls or e-mailed questions from the Business Report for this story.

In other matters related to the Johnson Dairy bankruptcy, the court on April 12 ordered that a proposed cash settlement with the U.S. Immigration and Customs Enforcement in the amount of $100,800 be accepted.

The dairy was raided by ICE in July 2009 and found to be in violation of laws regarding the hiring of illegal immigrants. ICE had initially sought a fine of $169,890 for violations of the Immigration and Nationality Act.

On July 30, the court issued an order dismissing Johnson Dairy’s complaint against New Frontier Bank, New Frontier Bancorp, former NFB officers Greg Bell and Timothy Thissen, and Daniel and Susan Kruse and William and Carol Bell.

The complaint, filed shortly after the bankruptcy on Jan. 25, 2009, alleged that Bell and Thissen unjustly enriched themselves in their dealings with Johnson Dairy, in part through cow leases arranged with the Kruses and Bells.

Johnson Dairy asked the court to dismiss its complaint without prejudice but noted it might at some future date restate its claims against Bell and Thissen.

And in a court document submitted Nov. 8, Weinman and Associates filed a “First and Final Application for Compensation and Reimbursement of Expenses” in the amount of $164,355.37.

johEATON – A dairy that was once one of the biggest and fastest-growing in the state may be on its way to emerging from Chapter 11 bankruptcy protection.

Johnson Dairy, located about five miles east of Eaton and owned by John D. Johnson, declared debts totaling more than $50 million in its bankruptcy filing in January 2009. About $50 million in claims were dismissed in November 2009 in a settlement reached with the Federal Deposit Insurance Corp., which took over New Frontier Bank after it failed in April 2009.

But Johnson and the dairy still owed more than…

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