Case Study

Kane Beef

CLIENT: Sam Kane Beef Processors

Gordian acted as financial advisor in successfully securing a buyer for the Company as a going concern, preserving the jobs of the Company’s 750 employees and guaranteeing further capital commitments.

Business Profiles

Situation

After several months in receivership, Gordian was engaged in late 2018 to run an expedited sale process.

Consistently unprofitable, selling Kane presented real challenges:

•Working at the mercy of a secured lender that was prefunding cattle purchases and providing Kane with weekly distributions to cover some, but not all, expenses;

•Pre-Receiver, a history of operational mismanagement including (but not limited to) purchasing below-market cattle at above-market prices and neglecting capital expenditures needed to run the plant efficiently; and

•Consecutive years of EBITDA losses greater than $(10)million.

Despite these hurdles, Gordian and Counsel, working for the Receiver, were in the market with a full CIM in under a month and received indications of interest from eight parties.
But, immediately after receiving bids, the Company’s sole facility was shut down due to environmental violations (subsequently fixed) and the secured lender refused to provide assurances they would continue to fund operations and cattle purchases. Kane was forced to stop operations, and furlough most of its employees, ultimately filing for chapter 11 protection the next day without a stalking horse bidder or DIP financing.

Engagement

Sam Kane Beef Processors (the “Company” or “Kane”) processes, produces, and distributes beef products in the United States and internationally. Gordian was successful in securing a buyer for the Company as a going concern, preserving the jobs of the Company’s 750 employees and guaranteeing further capital commitments.

Outcome

In the face of imminent liquidation, the Receiver and the Company’s advisors, including Gordian, negotiated the limited use of cash collateral to conduct a two-week 363 sale. Under difficult circumstances, we orchestrated a competitive auction that led to a successful going concern sale that included $20mm of committed capital from the purchaser and preserved the jobs of 750 employees.