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Baird Holm Secures Favorable Outcome for Private Capital Fund Client in Busted Turnaround Situation

on Wednesday, 19 January 2022 in Banking Update

Baird Holm’s Creditors’ Rights team, led by distressed investments attorney Jeremy Hollembeak, successfully executed an aggressive enforcement strategy to protect the client’s collateral rights and obtain a buyout on favorable terms.

Following a March 2021 default under its forbearance and rescue financing agreements with the client, the borrower – a farm and feedlot operator in Minnesota – transferred its farming operation to a non-borrower affiliate. The client believed this transfer was the borrower’s attempt to harvest and sell a 2021 crop outside the reach of the client’s security interest in all of the borrower’s farm products and proceeds.   

Baird Holm’s team uncovered and commenced litigation to attack the transfer, obtaining novel pre-judgment relief in a November 5, 2021 injunction order issued by a Minnesota state court. Among other things, the injunction order required all proceeds from the sale of the affiliate’s 2021 crop to be held in escrow pending a final determination of whether the client’s security interest attached to the proceeds on the basis that the affiliate was the borrower’s alter-ego. Baird Holm quickly used the injunction order to prevent nearly $1.5 million in 2021 crop proceeds from being paid to the affiliate and its lender who claimed to have a superior security interest in the proceeds.  

Shortly thereafter, the client was able to negotiate a buyout of its entire debt position at a price substantially higher than any offer made prior to the injunction order. The buyout, which Baird Holm closed in December, allowed the client to exit a deteriorating situation without suffering material loss on its overall investment or having to litigate another 18-24 months to forcibly liquidate its collateral through foreclosure and other judicial procedures.

A copy of the Minnesota Court’s November 5, 2021 injunction order and accompanying memorandum decision is linked here.

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