There was a flurry of activity this past week in the black bankruptcy cloud that hovers over Express Grain Terminal in Greenwood.
The grain business reportedly had a meeting with employees to let them know of the possibility of being downsized or shut down altogether.
The company legally has to give employees a 60 day advance notification of plant closings and mass layoffs through the Worker Adjustment and Retraining Notification Act, according to company President John Coleman.
Employees apparently received the letter earlier this week stating layoffs could begin January 28 and conclude by February 28. EGT employs nearly 150 people.
In December, Coleman told The Enterprise-Tocsin that he was working on a DIP loan or Debtor in Possession Financing through UMB Bank, the bank that has laid out millions of dollars already to EGT and the financial institution that put the bankruptcy protection plan into motion back in September.
But Coleman is still holding out hope, for a miracle of sorts. He responded to email questions from The E-T late Tuesday night stating that he is still working diligently on finding an equity partner for EGT.
“I am continuing to pursue several (equity) partners. In fact, I had some positive developments occur just today (Tuesday),” Coleman said. “I can’t be specific yet but we had a turn of events that could be very positive for everyone. We will not be needing a DIP loan with this new development.”
Coleman has always maintained that with the help of an equity partner, EGT could keep the doors open for his employees, while holding to the possibility that his farmer clients will be made whole.
“Per the WARN Act we must let employees know that there could be a layoff if there is a chance of one. My goal is to keep that from happening though. We need the jobs here in the Delta, and we need the economic development that is to follow,” he said.
According to Coleman, “The entire process will take several months, but the start of it would need to occur before the end of the month.”
And would Coleman still be in the owner seat if this equity partner comes through?
“Ownership perspective has not been decided yet. That will come later,” he said.
There is also the January 25 hearing the Mississippi Department of Agriculture has with the bankruptcy court. This involves the possibility of allegations stemming from accounting numbers given by EGT to Ag Commissioner Andy Gipson’s office last year while attempting to acquire its annual licenses from the state to run the grain business.
Meanwhile, the class action suit filed against UMB Bank by Don Barrett on behalf of Delta area farmers was amended on Tuesday. The amended suit is seeking an immediate jury trial.
“This is (we think) cutting-edge on the knowable facts to date and we are confident that more damning facts will turn up once we are allowed to begin looking at bank internal documents and deposing their personnel who ran the scam,” Barrett told The E-T. “Our group of firms represent about 140 farm families. The number is growing every day.”
The suit will be heard by Judge Henry Wingate in Southern District Court in Jackson.
“The bank has 30 days to respond. They will respond with a pro forma ‘motion to dismiss’ which will have no merit and will be denied, in our opinion,” Barrett said. “The court will schedule an initial case management hearing (hopefully soon) after which time we will probably be able to begin deposing the (UMB) bank employees.”
The amended suit portends that UMB Bank has known about EGT’s precarious financial position as far back as 2018. The suit from Barrett explains “Its (EGT) financial condition had been deteriorating for some time. For example, cash on hand decreased from $1,200,000 ($1.2 million) in 2018 to $641,000 in 2019 down to almost zero at the end of 2020 at $3,865.”
The suit claims this put EGT in violation of the bank’s requirement limiting its operating debts to $50,000 and limiting its capital expenditures to $1 million. The bank “Ignored these requirements and continued to enable Express Grain’s operations.”
The suit also claims EBTs financial statements were “frequently delivered late and were delivered late for the 2018, 2019 and 2020 fiscal years. The bank tolerated this untimely reporting.”
Barrett’s suit notes that UMB’s “Efforts to prop up Express Grain extended to falsely vouching to regulators that ‘all was well.’” Later in the suit it states, “The bank knew that its borrower, Express Grain, was a criminal enterprise, lying to the MDAC about its financial status to stay in business and lying to plaintiffs and the Class to induce them to bring their grain harvests to Express Grain.”
EGTs corporate auditor, Horne, LLP reported massive losses year-over-year according to the suit - net losses of more than $2.4 million in 2017 and $9.3 million in 2018. The total accumulation of losses is nearly $14 million and when adding in 2019 and 2020, the total climbs north of $21.6 million. The loans extended to EGT by UMB were modified at least four times due to EGT’s insolvency, according to the suit.
When contacted on Wednesday, UMB Bank representative Kaele Palmer, External Communication Manager, AVP, Corporate Communication said via email, “UMB does not comment on pending litigation, but we do want to reinforce that we take our role as a trusted financial steward to our clients and communities seriously.”
