Pipeline Foods cash collateral use draws objection from unsecured creditors

By Sarah Lizee

Olympia, Wash., Aug. 6 – Pipeline Foods, LLC’s motion to use cash collateral of its pre-petition lenders drew an objection Friday from the official committee of unsecured creditors, according to a filing with the U.S. Bankruptcy Court for the District of Delaware.

The committee said the cash collateral motion contains protections and waivers that are overbroad and at the expense of the debtors’ ability to pay the administrative expenses of the Chapter 11 cases, let alone any recovery for general unsecured creditors.

The debtors purchased large amounts of inventory immediately before filing their bankruptcy petitions. The committee said it anticipates a large pool of 503(b)(9) claims from farmers, many of whom could be forced into their own bankruptcy as a result of Pipeline’s Chapter 11 cases.

“Before such an expansive final cash collateral order is entered, the committee needs time to investigate the pre-petition lenders’ security interests, the debtors’ ability to pay for the administrative expenses of these Chapter 11 cases, and the pre-petition conduct of the pre-petition lenders and debtors,” the committee said.

The group said that if 503(b)(9) claims face nonpayment, some of the protections given to the lenders should be carved out, reserved in the budget or denied to at least ensure that these Chapter 11 cases will not become administratively insolvent.

As previously reported, the cash collateral motion has also drawn objections from Regions 3 and 9 U.S. trustee Andrew R. Vara and lender Compeer Financial.

Pipeline Foods is a Minneapolis-based organic food supply chain. The company filed bankruptcy on July 8 under Chapter 11 case number 21-11002.

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