The bankruptcy court entered an order on March 1, 2013 authorizing Bissett Produce to utilize its cash collateral in order to incur certain operating expenses anticipated in relation to a wind down of its operations. According to court documents, at the time of its Chapter 11 filing, Bissett Produce said it owed liabilities of nearly $5.5 million, with $2.1 million of that amount due to secured creditors and the remaining $3.4 million owed to unsecured creditors, including claims held by several farms located in North Carolina.
Importantly, Bissett Produce has neither established any type of carve out to pay PACA trust creditors nor filed any motion seeking to establish a PACA trust claims procedure. Rather, Bissett Produce simply asked the Court to allow it to use its cash collateral to pay pre-petition wages and to fund the wind down of the business. In essence, the defunct entity seeks to use assets, which most likely include PACA trust assets, to pay professionals, employee wages and other operating expenses without regard to any trust obligations that may exist. This is exactly the type of situation that requires an immediate objection to the Debtor’s continued use of cash collateral so that the PACA trust may be protected. Until the PACA trust is preserved and the unpaid suppliers of produce paid in full, there may not be an estate to administer.
Industry Note: Bankruptcy cases often move quickly with numerous motions filed on the very first day the case is open. Because of this, produce companies would be well advised to get involved in these types of cases early and take the steps needed to ensure trust assets are not placed out of the reach.