Kerr venture kaput

Wednesday, August 4, 2010

by SUSAN MANN

There may not be enough money generated from the sale of assets in Kerr Farms Sales (Chatham) Ltd., an award-winning boxed beef business placed into receivership by its bank July 7, to pay creditors.

Kerr Farms Sales had a line of credit with RBC for $360,000 along with other expenses, says shareholder Bob Kerr.

A spokesperson for receivers, BDO Canada Ltd., says only BDO partners are permitted to talk to reporters. No one from BDO returned calls by the deadline for this posting.

What’s the company worth? “Probably nothing,” Kerr says. “It’s going to leave debts unpaid.”

If there isn’t enough money generated from the asset sale to pay back the bank it will call on the personal guarantees it holds from the shareholders to cover any of the debt it is owned. “They (the bank) could call on us to pay up on the guarantees,” Kerr explains. He declined to state the value of the guarantees.
 
Kerr and three other partners, Amos Brielmann of Rainy River, Eugene Miniota (owner of meat distribution company Treeline Foods Ltd.) and Stefan Oellinger, started the business in 2006. That same year Kerr Farms Sales won a regional Premier’s Award for Agri Food Innovation Excellence. The business received the award for finding a way to bring more stability to the market for high quality beef by differentiating its product, it says on the OMAFRA web site.

But by 2008, the company was struggling to pay its producers. Producers complained to the government-run Ontario Beef Cattle Financial Protection program, which told Kerr Farms Sales to make payments or lose its license to buy cattle. The company subsequently worked out payment arrangements with producers.

Kerr, a former president of the Ontario Cattlemen’s Association and now a crop farmer who doesn’t raise cattle anymore, resigned as a director and from active management in the company in 2008 but remained as a shareholder. Kerr Farms Sales is a separate company from his farming operation. Kerr says he resigned from active participation in the company due to differences with the management (Miniota and Oellinger).

Kerr says he now regrets using the name of his ongoing business in the boxed beef business. 

Brielmann also resigned from active participation in 2008, Kerr says. Both men forgave the company their original capital investment in 2008. Kerr says he and Brielmann have decided not to publicly disclose what that amount was.

“The hope was to give them the opportunity to get the company on a good footing and raise additional capital,” he explains.

The company was established to sell and distribute beef raised without the use of hormones, antibiotics and without animal byproduct feeds. It bought cattle from farmers and arranged to have the animals custom killed and boxed then sold the meat to retailers.

But the company struggled to attract and retain customers, he says.

It’s not easy to establish a meat distribution company, Kerr explains, noting he’s disappointed the business didn’t succeed. Other businesses trying to develop a niche in the market have started up and gone out of business as well.

OMAFRA spokesperson Susan Murray says 11 farmers have made a total of $159,000 in claims to the Ontario Beef Cattle Financial Protection program due to the failed Kerr Farms Sales. The program is funded by a compulsory five-cents-a-head deduction when cattle are sold to licensed dealers. Eligible cattle sellers using a licensed dealer who defaults on a payment can make a claim. The program can compensate farmers for 90 per cent of their losses. BF