(UPDATED COVERAGE, MAY 8) In a move that might avoid bankruptcy, Monterey, Calif.-based Salyer American Fresh Foods is in the hands of a court-appointed receiver, who will decide the future of the company.The company faces massive debt.
Steve Franson, professional receiver from Fresno, Calif., who has experience with distressed agriculture companies, effectively took over the reins of the company May 6. Over the next two weeks, he will analyze Salyer Americanâs books and decide the viability of the vegetable marketer, according to a source familiar with the proceedings.
Franson said he arrived at Salyer Americanâs offices on May 7, but he couldnât discuss the details of his work.
âI will confirm I have been appointed receiver at this point in time,â Franson said. âIt doesnât serve the estate at this point for me to go into a lengthy discussion.â
Franson said he has âa lot of due diligenceâ and work ahead of him before he knows any specific information about Salyer Americanâs financial situation.
On April 29, three creditors filed a lawsuit against Salyer American, claiming $35 million in unpaid loans, the same week the company told its growers to stop planting. SK Foods Group, Monterey, Salyer Americanâs parent company, is not named in the lawsuit.
Donald Putterman, attorney for Salyer American, wouldnât address specifics of the lawsuit on May 6, but said Salyer American did not oppose a court-appointed receiver. Putterman said that avenue allows the company to sort through its financial problems and avoid bankruptcy.
âWhat I can say right now is that we donât have the financing and we have to have a receiver,â Putterman said.
Economy not to blame
Eric Schwartz, president of Monterey-based Salyer American and chief operating officer of SK Foods, said he gave his 30-day notice to the company at the end of April but was asked to leave early for unknown reasons.
After his departure, Lisa Crist, executive vice president of administration, assumed his responsibilities, Schwartz said, which are now being handled by Franson.
Salyer Americanâs financial state deteriorated rapidly in April, Schwartz said, in stark contrast to the profit it earned earlier in the year. Schwartz said he joined the company as part of a turnaround effort at Salyer American, bringing in new managers and a new business model.
Leaving was difficult, Schwartz said, but the environment at the company wasnât âhealthy for me professionallyâ and he made his decision quickly as the financial problems deepened.
Schwartz said he doesnât know where the money went or what it was used for because owner Scott Salyer owns several different companies as part of parent company SK Foods.
Schwartz also said he disagrees with statements Crist made in Salinas-area newspapers about Salyer Americanâs financial problems relating to the recession and tightening credit marketing nationally.
âIâm not sure what thatâs about,â Schwartz said.
For now, Schwartz said heâs still trying to figure out whatâs happened in the past couple of weeks and isnât looking to move to a new company immediately.
âI hope for all (Salyer American employeesâ) sakesâ things end up OK,â he said.
He joined the companies in April 2008 after resigning as president of Dole Fresh Vegetables Inc., Monterey. He was promoted to chief operations officer at SK Foods in August.
Bank of the West, along with AgStar Financial Services and FCS Financial services, are suing Salyer American for breach of contract stemming from a December 2007 loan.
Salyer American âdefaulted under various terms and provisions of the loan documents,â the lenders said in the complaint filed in Monterey County Superior Court.
Susan Davis, attorney for Bank of the West, did not return calls for comment.
According to court documents, Salyer American received a letter April 17 demanding payment on the loan by April 22. When it didnât receive payment, Bank of the West sent Salyer American a letter of default and continued to seek payment of the loan.
No credit, no crops
Glen Dupree, vice president and chief financial officer of Merrill Farms, Salinas, Calif., a grower for Salyer American, said the company was told April 27 over the phone to stop planting.
Dupree said he was ânot real surprisedâ by whatâs happened.
âWe have been wondering, as has the whole industry for some time, whatâs really going to happen with them,â Dupree said.
Representatives of Soledad, Calif.-based Braga Ranch; Salinas-based Major Farms and Salinas-based Jefferson Farms â former Salyer American growers â declined to comment for this story, pending an outcome of the companyâs financial problems.
L&R Crop-JTB Farming Inc., Somerton, Ariz., a Salyer American grower during winter production, did not return calls for comment.
Salyer American, established in 1986, is one of the largest grower-shippers in the Salinas Valley, specializing in leafy greens and colored cauliflower.