Ill-Fated Chicken Co. With Over $50M Debt Gets Ch. 7 Lifelife
April 2024 | Law360 |
A Delaware bankruptcy judge agreed to let the Chapter 7 trustee for Cooks Venture Inc., a poultry business that offered meat from specially-bred chickens, access post-petition financing Thursday after he said the birds would eat one another unless the company could buy chicken feed.
During a hearing in Wilmington, U.S. Bankruptcy Judge Karen B. Owens said she would sign off on an order granting Cook's Chapter 7 Trustee Alfred T. Giuliano interim access to cash collateral and post-petition financing once she got a revised draft that included language that resolved her feedback. That order was necessary, because unless there was money to pay for chicken feed the birds would cannibalize each other or it would be necessary to kill them, devastating the bankruptcy assets, said John Caroll III, of Cozen O'Connor, who is representing the trustee.
"I will approve the interim order," Judge Owens said, noting that allowing the trustee to keep paying Cooks' costs while setting up to sell its assets made good business sense. "I'm satisfied that the trustee has met the burden to approve the motion."
Cooks, based in Arkansas, entered bankruptcy in Delaware on April 19 to dissolve its business, saying it had between $50 million and $100 million debt against only $1 million to $10 million in assets, according to its petition.
The company, whose website advertises a proprietary breed of chicken called The Pioneer that the company said grew "slower than conventional birds," shuttered in November with little warning, resulting in more than 1 million chickens being euthanized, according to multiple media reports.
In 2018, Matthew Wadiak - formerly of Blue Apron - founded Cooks Venture and remained its CEO until August, according to LinkedIn. Wadiak told Axios in a March exclusive interview that he couldnt' speak to the company's operations after his departure, but that it had needed significant capital and even with a good amount of investment was still cash strapped. He said the company could have succeeded with more capital.
An Arkansas state senator penned a letter on Dec. 8 to Gov. Sarah Huckabee Sanders asking her to declare a state of emergency after Cooks closed and saying the state should give those involved in resolving the situation "full compensation." The state Senator, Bryan King, said in his letter that the circumstances of the closure involved animal welfare and environmental issues.
King's letter said that the possible euthinization of such a large number of chickens would significantly burden the poultry growers tasked with disposing of the carcasses.
The state's agriculture secretary declined in his own letter, saying it was not within the government purview to adopt private debts. The Secretary's letter noted that the staff of the department had worked over Thanksgiving to address the situation.
Multiple outlets reported that the Arkansas Department of Agriculture "depopulated" more than 1 million birds in the area. According to the reports, the departments tied its response to an outbreak of highly pathogenic avian influenza.
Carroll told the court Thursday the company had made most of its money selling its Pioneer breed's meat to businesses like Trader Joe's and also offered an arrangment where it would deliver poultry directly to consumers. By selling off its assets, the trustee could set aside enough money to satisfy some of its secured creditor's claims, Carroll said. The trustee had hopes of closing a sale of the assets, which include the chickens and real estate, by May 10, he said. But, to do so to full effect, the birds had to be alive, he said.
When it filed for bankruptcy, the company listed around 90,000 live birds across multiple farms as property in need of immediate attention in a schedule included with its filings.
The Chapter 7 Trustee had agreed with UMB Bank NA to make use of cash collateral and post-petition financing under the proposed order, and had a budget that could hold Cook's bankruptcy together until Mid-May. After failing to get cash from new money leners, this deal was the best way for the trustee to pay his way, Carroll told the court.
The proposed order for interim access to the financing had gotten informal responses and an objection, but the trustee had worked hard to satisfy dissenters with revised language, Carroll said.
"There must be an easier way to make a living," he said.
Judge Owens agreed to sign off on the final version of the order that smoothed out the conflicts once it was filed.
The Chapter 7 Trustee is represented by John Caroll III and Simon E. Fraser of Cozen O'Connor.
UMB Bank National Association is represented by Jaclyn C. Marasco, Laura E. Appleby and Kyle R. Kistinger of Faegre Drinker Biddle & Reath LLP.
The case is In Re: Cooks Venture, Inc., case number 24-10828, in the U.S. Bankruptcy Court for the District of Delaware.
