Eurofresh moves to restructure
By David Wichner and Daniel Scarpinato
ARIZONA DAILY STAR 5/29/09
PHOENIX — Eurofresh Inc., a hydroponic vegetable grower and major Southern Arizona employer, took its first steps in court this week toward restructuring its debt in bankruptcy.
Following a hearing Wednesday in Phoenix before U.S. Bankruptcy Court Judge Charles G. Case II, the company filed a proposed order that would allow it to use its current cash and assets to fund operations.
The judge had not issued an order as of late Thursday.
Eurofresh filed for Chapter 11 bankruptcy reorganization April 21 in Phoenix, blaming costly pest and disease infestations, labor problems and high debt levels. Under Chapter 11, debtors are protected from legal actions while they work out a plan to repay creditors.
Eurofresh, which in a filing last week listed assets of $172.7 million and debts of $241.3 million, said it has an agreement with a group of investors, including founder and Chairman Johan van den Berg, to recapitalize the company in an exchange of debt for stock.
During Wednesday’s hearing, the company presented an optimistic outlook on its future profits, but some utility creditors wondered whether they would be repaid for outstanding bills. Attorneys for Southwest Gas Corp. said Eurofresh owes the company $1.3 million in unpaid bills for natural gas service.
Southwest Gas attorney Kaaran Thomas said the utility is concerned how, given its financial issues, Eurofresh will manage to pay its bills as it continues to receive services.
“We do not understand how that is going to happen,” she said.
An attorney for the power company Arizona Public Service testified that Eurofresh owes about $20,000 in unpaid bills, though Eurofresh has listed the debt as $6,800.
Eurofresh attorney Craig Hansen painted a positive picture of the company’s status, noting that clients have remained with the company as it restructures.
“This is a stable process,” he said.
A monthly financial report Eurofresh filed last week showed the company had an operating profit of nearly $11 million this year through the end of April. But after $15.8 million in interest expenses, more than $2.5 million in reorganization costs and other non-operating expenses, the company posted a net loss of about $11.7 million through April.
“We continue to have positive cash flow and positive earnings,” Eurofresh CEO Dwight Ferguson said in an interview Thursday.
Under bankruptcy law, utility creditors can’t shut off service solely on the basis of a bankruptcy filing or pre-filing debt, but they are allowed to ask for additional deposits from debtors.
In a filing last week, Eurofresh noted that the court had authorized the company to negotiate additional deposits with utility creditors.
The company said that it offered to pay Southwest Gas a deposit of $431,770 but that Southwest Gas had “demanded” a $4.2 million deposit. UniSource Energy Services, a subsidiary of Tucson-based UniSource Energy Corp. that provides electric and gas service mainly in parts of rural Arizona, was offered a $16,573 deposit and asked for a deposit of $61,856.
Southwest Gas spokeswoman Cynthia Messina said the Las Vegas-based company continues to negotiate with Eurofresh over the unpaid bills, ahead of a hearing on the matter tentatively set for July 6.
“It’s important that we work through the process within the laws and our tariffs,” Messina said, referring to procedures set forth in its state-regulated rates.
She said the debt owed by Eurofresh reflects natural gas usage in March and through three weeks in April. Eurofresh uses gas to heat its greenhouses.
Messina said Southwest Gas had no record of demanding a $4.2 million deposit. She said Eurofresh may have extrapolated that amount based on Southwest Gas’ state-regulated rates, which allow the utility to collect deposits based on a multiplier applied to a ratepayer’s highest bill.
Contact Assistant Business Editor David Wichner at 573-4181 or dwichner@azstarnet.com.
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