$4.8M Allens settlement awaits judge
The trustee in the Allens Inc. bankruptcy case is asking a judge to approve a nearly $4.8 million settlement with three of the defunct company’s directors.
In a filing made late last week, Ray Fulmer, the trustee for the estate of Veg Liquidation, formerly known as Allens Inc., said that after mediation, he believed the payment by Zurich Insurance Company for $4,795,730 was in the best interest of the estate’s remaining creditors. The money came from a directors’ and officers’ liability insurance policy covering the three directors. The policy had an approximate limit of $5 million.
Bankruptcy Judge Ben Barry with the U.S. Bankruptcy Court for the Western District of Arkansas will have to approve the settlement.
In an adversary proceeding first filed in November 2014, Fulmer contended that John Allen, Nicholas Allen and Roderick Allen, who were officers and directors of the Siloam Springsbased vegetable company, made fraudulent or avoidable transfers of the company’s assets to themselves or related parties when they knew the company was insolvent. Adversary proceedings are lawsuits filed separately from but related to a bankruptcy.
According to court filings, those transfers included loan payments, loan forgiveness and payment of personal expenses with company funds. In an amended filing in July, Fulmer contended that the total claims
were valued at more than $17 million, including interest and attorneys’ fees.
In court documents, the Allen brothers denied the allegations, contending the moves were part of their compensation and that the company wasn’t insolvent at the time.
In a phone interview Tuesday, Fulmer said mediating the settlement was a daylong process. He said that while the amount of the settlement may seem large, it’s just a drop in the bucket when the entire amount still owed to creditors is considered.
A phone message and an e-mail requesting comment from Little Rockbased attorney Grant Fortson, who represents the three Allen brothers, were not returned by Tuesday afternoon.
Allens Inc., which had been in operation since 1926, filed for Chapter 11 bankruptcy protection in October 2013. At the time, Allens owed its primary lenders $114.36 million and its secondary lenders $65.6 million, according to documents.
Sager Creek Acquisition Corp. bought Allens at auction in February 2014 with a winning bid of $123.8 million. At the time, the total value of the Allens sale, along with debt and other considerations, was just shy of $160 million, according to court filings.
The bankruptcy has since been shifted to Chapter 7. Allens Inc. was renamed Sager Creek Vegetable Co. in July 2014.
In March 2015, California-based Del Monte Foods Inc. bought all the assets of Sager Creek Vegetable Co. for $75 million in cash. The Sager Creek Vegetable Co. owned by Del Monte Foods is not part of Fulmer’s suit.
Fulmer filed an adversary proceeding in March contending that multiple entities involved in the initial sale of the company made arrangements that left the estate’s coffers empty.
At the time, Fulmer said those involved in purchasing Allens — including Sager Creek Vegetable Co. along with the investment funds that owned the company, several of Allens’ financial advisers, and some of Allens’ suppliers — significantly affected the value of the estate and its ability to pay back creditors, either through intentional actions or lack of candor with the court. The adversary proceeding is ongoing.