An insurance policy set up for demised Prairie pulse exporter ILTA Grain will pay, in full, what’s owed to over 200 growers who supplied the company, according to the Canadian Grain Commission.
The CGC announced Monday that 222 eligible unpaid growers will receive a total of $11.146 million covered by the security ILTA posted before it was put under creditor protection last July.
Payments have been issued and will be delivered “in the coming days,” under the commission’s Safeguards for Grain Farmers Program.
Under the program, CGC-licensed grain companies have to tender security for outstanding grain liabilities in the form of either a bond, letter of credit, letter of guarantee or payables insurance. If a licensed company defaults on paying farmers, the CGC uses the security to compensate those eligible.
Producers must submit claims for compensation within 90 days of delivery or within 30 days from the date the cash purchase ticket or cheque was issued, whichever is less.
Following ILTA’s default, the CGC assessed 271 producer claims, which the commission noted was “the largest number ever received against a company’s security.”
ILTA’s default also represents the largest total security payout in CGC history, the commission said — although not all affected producers who made claims are eligible for payment in this case.
That’s partly because some farmers were owed money for canary seed deliveries, which aren’t regulated under the Canada Grain Act. That group includes 44 farmers, who are still owed about $2.1 million.
Other ineligible producers had amounts outstanding for deliveries made outside the program eligibility period, the CGC said. Those producers and the canary seed growers will be left to seek whatever assets are left available for ILTA’s unsecured creditors. The company’s primary secured creditors include HSBC and Farm Credit Canada.
“The ILTA Grain Inc. situation has been a difficult one for everyone involved, and we are very pleased to be able to deliver over $11 million in payments to producers who were owed money,” CGC chief commissioner Patti Miller said in Monday’s release.
Having suspended ILTA’s licenses in July, the CGC in August allowed ILTA to operate its primary elevators at Saskatoon and Belle Plaine, Sask. and to carry on business as a grain dealer “under specific conditions.”
Among those conditions, ILTA wasn’t allowed to buy or receive grain from producers, but was able to ship out remaining stocks of grain, a task it completed in mid-October.
For producers who had delivered grain into ILTA’s stocks but hadn’t received documentation, the CGC negotiated the setup of an escrow account worth about $3 million, above and beyond ILTA’s payables insurance policy.
Atradius, the insurance company covering ILTA’s payables, wired $11.146 million to the CGC on Dec. 27 to cover the eligible claims — including claims by producers who had delivered to ILTA but didn’t receive documentation.
HSBC, as a secured creditor, has a hearing scheduled at the Supreme Court of B.C. in Vancouver on Thursday and Friday this week. According to PwC Canada, which is serving as ILTA’s court-appointed monitor, HSBC is seeking an order to get $11 million PwC has been holding in trust pending the outcome of the CGC claims process, plus the money in the escrow account.
‘Could not pay’
The CGC said Monday it generally recommends producers limit their risk of financial loss by requesting payment for each load at time of delivery. Past that, producers who see delays in being paid for grain should contact the CGC “immediately.”
But according to Atradius in court documents it filed Dec. 30, it had been ILTA’s practice to mail out elevator and grain receipts and cash purchase tickets after the fact, historically within a week of receiving grain.
However, according to Atradius, as ILTA “began to experience liquidity issues… this delay grew to as much as 28 days.
“In other words, despite its liquidity issues, ILTA continued acquiring grain from producers at a time when it could not pay for it (and) did not pay the producers for their grain, and in fact delayed payment to the producers.”
Atradius will be in court this week disputing HSBC’s claim to the money from the sales of grain ILTA had on hand. The insurer in this case will be the “subrogee” for the farmers to whom it has already paid out on its policy via the CGC, which means it “steps into the shoes of the producers who are precluded from double recovery.”
In its Dec. 30 response to HSBC’s application, Atradius contends that ILTA “failed to issue valid (cash purchase tickets) and therefore did not acquire title to (the unpaid producers’) grain.”
ILTA was formed in Surrey in 2011 by former managers of specialty crop export firm Finora, after that company’s owner, Noble Group, sold Finora and its four plants in Saskatchewan and Alberta to AGT in 2009.
According to an affidavit last July, the company, which deals mainly in pulse crops, faced “increasingly challenging international trade conditions” in recent years affecting its business in export markets including India, China and Saudi Arabia.
Since it entered creditor protection, ILTA’s crop handling and processing facilities have been sold off to assorted buyers, starting with Viterra, which bought the ILTA pulse facility at Belle Plaine, Sask. in August.
In November, court approvals were granted for the sale of ILTA’s processing plant at Saskatoon to containerized crop handling firm DG Global, and for four other Saskatchewan sites — two at North Battleford and one each at Swift Current and Cut Knife — to be sold to an arm of trading firm ETG Commodities. — Glacier FarmMedia NetworkTagged Atradius, canadian grain commission, CGC, claims, creditor protection, default, HSBC, Ilta Grain, security