Shuttered indefinitely on Monday, Eastern Canada's largest packing plant for cull cattle has now gone into receivership.
The Federation des producteurs de bovins du Quebec (FPBQ), which majority-owns the Levinoff-Colbex facility at St-Cyrille-de-Wendover, Que., said Friday that the plant's creditors have asked for and were granted a court-appointed receiver.
Specifically, lawyers for National Bank of Canada on Thursday filed a motion in Quebec Superior Court in Montreal for the appointment of accounting firm RSM Richter as receiver.
According to National Bank in its court filing, the plant's management in April sought to set up a financial restructuring plan that would allow it to secure government funding for needed upgrades, after talks fell through with a "potential partner."
However, the bank said, the request came as the plant appeared set to lose over $7.5 million for its fiscal period ending Dec. 31, and monthly losses generated by operations were upward of $1 million.
The FPBQ said Monday that market conditions in North America's beef processing industry have further deteriorated since the beginning of 2012.
According to National Bank, Colbex's chiefs advised that the company would need another $3 million in interim financing to maintain normal operations until the end of August this year, by which time its restructuring plan could be put in place.
During the weekend of May 26-27, however, the company reported the interim financing was "uncertain" and might not be arranged in time. The FPBQ had said in a release Monday that the timeline for its restructuring plan was too tight for any option other than to postpone it and shut down operations.
On May 27, all of the company's executives and directors submitted their resignations, leaving the company "without direction," National Bank said.
The bank added that on May 29 it then had to send back about $850,000 in cheques written by the company.
The FPBQ said Friday it will continue to do whatever's needed to ensure effective and orderly marketing of cull cows and bulls through livestock auction channels.
Cull animals that were sold this week, and those still to come, will be redirected to other slaughter plants in Quebec and elsewhere in Canada or in the U.S., the FPBQ said.
Dairy and beef producers can contact the FPBQ for information about their marketing options, "the objective being that (producers) get the best prices possible," the federation said.
The FPBQ said Friday it favours an arrangement that would see the Colbex plant sold as is, to a single buyer, holding out the possibility that slaughter could restart at the plant -- rather than any deal that would see the plant's equipment and assets stripped and sold piecemeal.
However, the federation noted, the receivership leaves the FPBQ with no control over the plant or the fate of its assets.
The federation said its thoughts are now also with the plant's workers and their families going through a difficult period, and thanked the plant's suppliers and private- and public-sector supporters for backing the plant up until last Monday.
Levinoff-Colbex has been the main cull cow packer for producers in Quebec, Atlantic Canada and Ontario since Kitchener's Gencor Foods plant shut its doors in 2008.
The Colbex plant at St-Cyrille, northeast of Drummondville, was the focus of a blockade by cattle producers in 2004 in the wake of the BSE crisis, when the bottom dropped out of the market for cull cattle from dairy and beef operations.
The FPBQ, through a levy on incoming cull cattle, bought an 80 per cent stake in the plant in 2007 and began paying 42 per cents per pound for cattle delivered there.
Producers in 2008 voted to contribute $53.86 per cull cow for another capital injection of $30 million into the facility, then voted in April this year to pursue a new co-op ownership model.
The province's opposition Parti Quebecois ag critic, Andre Simard, called Wednesday for an investigation of the Colbex plant by Quebec's auditor general.
The plant's closure is bad news for cattle producers and the plant's 270-odd workers, but also raises "serious questions" about the price paid for control of the facility and the province's role in that deal, Simard said.
The plant's previous owner/operators, the Cola family, are known to have close ties to Premier Jean Charest and has financially supported the province's governing Liberal party, Simard said.
The province's financial exposure to the Colbex plant includes a $19 million loan from Investissment Quebec and its guarantee of the plant's $10 million operating line of credit, he noted.
Meanwhile, farmers' group L'union Paysanne on Tuesday reiterated its previous call for Agriculture Minister Pierre Corbeil to conduct a full inquiry into the Levinoff-Colbex file.