Mushroom farm restructures operations

Thursday, December 11, 2008

© Copyright AgMedia Inc

by SUSAN MANN

Canada’s largest mushroom farm, Rol-Land Farms Ltd., is under court-ordered protection from creditors so it can restructure.

“As a result of current economic circumstances, Rol-Land Farms has determined that it is in the best interests of its shareholders, employees and creditors to seek protection pursuant to the CCAA (Companies’ Creditors Arrangement Act) and to restructure so that it can emerge as a stronger and more viable operation,” the company said in a press release Thursday.

The company stated it has the full support of its bank and senior management. Rol-Land’s bank, the Bank of Montreal, is the most significant secured creditor and is owed about $35.3 million, excluding continuing interest and costs, it said in documents on the web site of the court-appointed monitor, PricewaterhouseCoopers Inc.

As a result of the company’s deteriorating financial situation, the bank issued a demand for payment on Nov. 27.

“There’s no comment,” said a woman who answered the phone at Rol-Land’s head office in Blenheim Thursday.

Calls to Rol-Land’s Hamilton law firm, Scarfone Hawkins, and the court-appointed monitor weren’t returned by the time of this posting.

Rol-Land Farms, which supplies about one million pounds of mushrooms a week to Canadian and some U.S. retailers, is embroiled in a controversy after firing more than 70 Mexican and Jamaican workers without notice last week from its operations at Campbellville near Milton and evicting them from their rented apartments. At least seven of the workers stayed in Canada and talked to reporters at a press conference in Toronto Thursday. It was organized by the United Food and Commercial Workers Union Canada, one of the organizations helping the workers.

The Mexican and Jamaican workers were among 97 workers terminated from the company’s Campbellville farm last week. The company employs 1,200 non-unionized workers, including 103 salaried people, at locations in Blenheim, Kingsville, Campbellville, Crossfield (Alberta) and Summerside (Prince Edward Island), where it manages a mushroom farm for Money’s Mushrooms Ltd. Campbellville is the largest location with 554 employees.

The workers were terminated as part of the company’s restructuring efforts, it said in the court documents.

Hendrik Vander Pol is the company’s president and director. He, along with his son, Eric, and two brothers, Peter, and Art, own the common shares and some of the classes of specials shares, while Rol-Land employees own Class E and F shares.

The union learned of the Mexican and Jamaican workers’ firings from the workers and representatives from a legal clinic. They were hired by the company as part of the federal Temporary Foreign Worker Program. The workers were here for four to eight months, but believed their employment was to be for two years.

Stan Raper, UFCW Canada spokesman, said the Creditors’ Arrangement Act may enable Rol-Land to seek protection from creditors, “but they can’t escape what they’ve done.”

The union will continue looking to see if Rol-Land broke any laws regarding lack of notice under the Employment Standards Act or lack of adequate notice before eviction under the Landlord and Tenant Act.

Raper doesn’t believe the company is in financial trouble. Why did Rol-Land Farms seek court-ordered protection from creditors? “I would say because they had very few options,” he noted, adding he’s received dozens of emails and phone calls from people very upset by how it treated the foreign workers and vowing to boycott Rol-Land’s mushrooms for life. He directed the calls to the company.

But court documents paint a different picture. During the past year, Rol-Land’s financial situation became progressively worse.

The company began mushroom production in Blenheim in 1980. In 1996 it expanded by buying the Kingsville farm. In 2005, it expanded again by buying Money’s operations in Campbellville and Alberta and agreeing to manage the Prince Edward Island farm.

For the past three years, Rol-Land made a “cumulative capital investment” of $30 million to modernize the Campbellville location. Funding came from Rol-Land’s operations; the company didn’t get adequate term loan financing, it said in the court documents.

Even though the investment in Campbellville lead to a 60 per cent increase in weekly production, Rol-Land has had trouble achieving forecasted production volumes. The farm averages production of 350,000 to 450,000 pounds of mushrooms each week, but it should be producing 700,000 pounds weekly to meet its operating costs and general obligations.

In early October, Rol-Land tried to improve its financial situation by implementing a number of measures, including a 12-per-cent increase in mushroom prices in Ontario and Prince Edward Island and a six-per-cent increase in Alberta. These steps didn’t immediately improve Rol-Land’s financial situation, the company says.

Rol-Land’s restructuring plan includes:

• selling off unprofitable locations like Crossfield;
• scaling down the Campbellville location, including reducing the labour force;
• identifying and concentrating on the most profitable customers; and
• winding down leases for all unprofitable locations. BF