Wed 07/06/2022 13:18 PM
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Relevant Documents:
Voluntary Petition
First Day Declaration
First Day Hearing Agenda

















Summary
Agway Farm & Home Supply is a wholesale product distribution company
In process of winding down
In negotiations with several strategic potential buyers on subsets of the debtors’ intellectual property, fixed assets and inventory assets


Agway Farm & Home Supply LLC, a Richmond, Va.-based wholesale product distribution company, filed for chapter 11 protection on Tuesday, July 5 in the Bankruptcy Court for the District of Delaware, after initiating a wind down in March. The company operates across six major categories: (i) seasonal home and hardware; (ii) farm products; (iii) lawn and garden; (iv) bird food and supplies; (v) pet food and supplies and (vi) animal health needs.

The debtor is eyeing an auction and/or sale of its assets by the end of July. In his first day declaration, Jay Quickel, the chief executive officer and president of Agway, says that he is negotiating with several strategic potential buyers with “varying interests” in the debtor’s intellectual property, fixed assets and inventory.

Quickel reports three letters of intent for portions of the debtor’s assets, noting interest from one potential buyer interested in substantially all of the debtor’s intellectual property and another in the debtor’s inventory. The company also received a letter of intent for a “significant” amount of the debtor’s inventory that was rejected for being too low. As sale discussions continue, the debtor has implemented a discounted rate on inventory, with Class A products discounted 20%, Class B at 35% and Class C and Class D at 50%. “The Debtor continues its discussion with various Strategics to hopefully come to terms on one or more agreements to sell all or a portion of its assets subject to overbid,” Quickel says, adding that if it does not, “it will seek to auction its remaining assets.”

The first day hearing has been scheduled for tomorrow, Thursday, July 7 at 11 a.m. ET.

The company reports $10 million to $50 million in both assets and liabilities. The company’s secured creditors consist of CIT Bank (secured by various laptops and computer hardware) and CCA Financial LLC (secured by handheld barcode scanners located at the debtor’s Cloverdale, Va. distribution center). The debtor is current on payments on the CIT and CCA debt.

The debtor’s prepetition capital structure includes:

  • Secured debt:

    • Equipment financing from CIT Bank NA and CCA Financial LLC discussed above



  • Unsecured debt: $28 million



  • Equity: Agway Holdings LLC holds 100% of the debtor’s equity.


Prepetition, the debtor paid off a $20 million line of credit with Gibraltar Business Capital prepetition, following a notice of default.

The debtor is represented by Shulman Bastian Friedman & Bui as general counsel, Morris James as local counsel, ABC Services Group as chief liquidating officer and Focus Management Group as financial advisor. Stretto is the claims agent. The case has been assigned to Judge J. Kate Stickles (case number 22-10602).

Events Leading to the Petition Date

The company attributes the bankruptcy filing to a delayed implementation of an internal technology system, making it impossible for the debtor to timely reconcile payments from customers to pay vendors on time, causing the company “irreparable damage.” The debtor also asserts that one of its largest freight providers, HUB Group Inc., retroactively charged it for unauthorized expenses, leaving the company unable to pay “certain bills and expenses.” Though HUB is returning $140,000 of inventory, the debtor says that there will be shrink and spoilage. Then, in January, Gibraltar sent a notice of default and refused to advance funds, leaving the debtor unable to purchase additional inventory.

In March, the debtor initiated a wind down plan, pursuant to which it laid off about half of its workforce (with continuing layoffs thereafter) and offered retention bonuses to certain “critical” employees.

Background

The original Agway Cooperative was formed in 1964, but in 1999, the original Agway Cooperative sold or closed all of its retail outlets and sold its warehouse system to Southern States, which acquired the Agway brand name. In 2020, Agway Holdings LLC acquired substantially all of the assets of the Division from Southern States, at which time it rebranded as Agway Farm & Home Supply LLC.

The debtor, headquartered in Richmond, Va., with warehouses and distribution centers in Cloverdale, Va., and Westfield, Mass., is a wholesale product distribution company that serves a broad network of independent retail stores and provides full-service retail advisory support. The company has services dealer locations along the East coast, including Maine, New Hampshire, Vermont, Massachusetts, Maryland, New York, Delaware, Rhode Island, New Jersey, Connecticut, Pennsylvania, Kentucky, West Virginia, Virginia, North Carolina, South Carolina, Georgia and Ohio. Agway also has a satellite distribution center in West Springfield, Mass. The debtor offers wholesale distribution services across six major categories: (i) seasonal home and hardware; (ii) farm products; (iii) lawn and garden; (iv) bird food and supplies; (v) pet food and supplies and (vi) animal health needs. The debtor also licenses the right for dealers to utilize the Agway brand and charges freight costs.

In 2021, the debtor’s unaudited gross revenues were $225.2 million with an unaudited net loss of $9.1 million. In 2022, through May 31, unaudited gross revenues were $23.3 million with an unaudited net loss of $7.4 million. In 2021, product sales (spanning more than 15,000 SKUs) made up 98.2% of revenue, with dealer fees and freight revenue constituting the remainder.

The debtor is also a defendant in various lawsuits in state courts.

The debtor's largest unsecured creditors are listed below:










































































10 Largest Unsecured Creditors
Name Location Claim Type Amount
Hub Group Trucking, Inc. Atlanta
Transportation

Services
$    2,160,817
Tarter Farm & Ranch Equipment Dunnville, Ky. Trade 1,499,576
Animal Health International, Inc. Denver Trade 1,370,206
Phillips Feed & Pet Supply Easton, Pa. Trade 1,237,562
Cargill Salt Division Charlotte, N.C. Trade 1,222,548
American Wood Fibers, Inc. Columbia, Md. Trade 1,073,076
Cargill Animal Nutrition Chicago Trade 969,175
Bekaert Corporation Atlanta Trade 848,872
Oldcastle OSP Lime & Rock Atlanta Trade 614,661
Vaporizor LLC Pittsburgh Trade 513,578

The case representatives are as follows:


 



























































Representatives
Role Name Firm Location
Debtor's Co-Counsel Jeffrey R. Waxman Morris
James
Wilmington, Del.
Brya M. Keilson
Debtor's Co-Counsel Alan J. Friedman Shulman
Bastian
Friedman
& Bui
Irvine, Calif.
Melissa Davis Lowe
Max Casal
Debtor's Chief
Liquidating Officer
NA  ABC Services
Group
NA
Debtor's Financial
Advisor
NA Focus
Management
Group
NA
Debtor's Claims Sheryl Betance Stretto Irvine, Calif.
U.S. Trustee Richard L. Schepacarter Office of the
U.S. Trustee
Wilmington, Del.



De Minimis Asset Sale Procedures Motion

The debtor seeks approval of procedures for de minimis asset sales through the end of July “(although it could be as late as end of August 2022) when the Debtor receives a bulk offer for the purchase of its assets and the sale of De Minimis Assets would cease, or the Debtor determines it must conduct an auction for the sale of its remaining assets.” According to the motion, the debtor expects the sales of de minimis assets to total, collectively, no more than $200,000 per week postpetition, with an average transaction of $3,000. The debtor asserts that de minimis assets sales at the discounted rates noted above would “yield a higher rate of return than will a sale to a Strategic and certainly more than will an auction sale.”

Other Motions

The debtor also filed various standard first day motions, including the following:


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