By P.J. Huffstutter
CHICAGO, Feb 6 (Reuters) - Where did all the turkeys go?
That's the question attorneys for the buyer of bankrupt
Zacky Farms LLC is asking, amid claims that one of the nation's
largest turkey and chicken processors has been rushing to dump
the bulk of its inventory of frozen turkeys - and speed up
getting paid for it - prior to a rival completing its purchase
of the nearly 100-year-old California family business.
Zacky Farms filed for Chapter 11 bankruptcy protection last
October, blaming its economic woes in part on high feed costs
following the worst drought in half a century.
Attorneys for Pitman Family Farms filed papers on Tuesday
with the U.S. District Bankruptcy Court in Sacramento in which
they claimed Zacky Farms has sped up the sale and delivery of
more than $1 million worth of whole turkey inventory to Stater
Bros. Markets, a private grocery retailer based in Southern
The sale of the inventory had been originally scheduled from
Jan. 30 through March 8. Instead, according to Pitman's
attorneys, "Zacky revised the delivery schedules to deliver five
or six loads a day" so all of the meat would be delivered to the
retailer weeks before the bankruptcy court's expected approval
of the sale of Zacky Farms.
The agreement to buy Zacky Farms out of Chapter 11
bankruptcy was based on Pitman having access to that inventory
of frozen birds "to help offset losses that will be incurred
after the approved sale," according to the court papers.
Zacky Farms now is losing approximately $3 million to $5
million each month.
An attorney for Zacky Farms told Pitman and its lawyers that
such sales were typical of a poultry company in Chapter 11
bankruptcy, according to a copy of an email filed with the
Pitman's attorneys are asking the court that it escrow the
proceeds from the "objectionable sale of these assets" for the
time being, according to the court filings.
Attorneys for Zacky Farms could not be reached for comment.
Jan T. Perkins, an attorney for Pitman Farms, declined to
comment on the court filing.
"We have not changed our turkey purchasing patterns one
bit," Stater Bros. chief executive Jack H. Brown told Reuters.
"The timing is the same as we've always done."
Zacky Farms also recently sold 21 loads of "odd-sized"
turkey breast meat to another company, Bird-in-Hand Farms Inc,
at deeply discounted rates, according to the court filings.
The sales began a day after Pitman signed papers in late
January to buy Zacky Farms out of bankruptcy, according to court
papers. The sales allegedly ranged from $1.11 to $1.30 per pound
of turkey breast meat. Current market prices for such meat range
from $1.65 to $1.68 per pound, court papers state.
Bird-in-Hand Farms could not be reached for comment.
The legal debate marks the latest twist in the bankruptcy
case. Last month, a Zacky Family trust pulled its bid to buy the
operation out of bankruptcy. The struggling Fresno-based
processor then accepted a $32.1 million back-up bid from Pitman
Pitman is a family-owned poultry farm operation in
California, and is known for its free-range line of turkeys and
Zacky Farms has said in court filings that, as of last fall,
it employed about 1,500 people in Fresno, Los Angeles, Tulare,
Kings and San Joaquin counties. It had listed between $50
million to $100 million in assets, with debts in the same range,
according to court filings at the time.
Company officials said in a statement last fall that the
entire poultry industry has been strained by historically high
feed prices which led Zacky Farms to incur "significant
operating losses that have depleted its liquidity and working
capital position" in its chicken and turkey businesses.
At the time of its bankruptcy filing, Zacky Farms was the
eighth poultry firm to either be sold, enter into Chapter 11
bankruptcy or shut down altogether since 2011, according to data
from the trade group National Chicken Council.
The case is Zacky Farms, LLC, U.S. Bankruptcy Court for the
Eastern District of California, 12-37961.
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