April 21, 2009 / 9:29 PM / 8 years ago

UPDATE 2-EuroFresh seeks bankruptcy, cites crop loss, labor

* Cites immigration policy changes for labor crunch

* Biggest creditors include Apollo, Barclays, JP Morgan (Recasts, adds details from filing throughout, S&P downgrade, background on Apollo Investment Management)

By Phil Wahba

NEW YORK, April 21 (Reuters) - EuroFresh Inc [EFRSH.UL], an Arizona grower of tomatoes and cucumbers, filed for bankruptcy protection on Tuesday, partly blaming changes in immigration law for the action that could cost its unsecured creditors millions of dollars.

Its largest unsecured creditors include Apollo Investment Management, which holds $76.5 million in notes; Barclays Capital (BARC.L) with $47 million in notes; and JP Morgan Investment Management (JPM.N) with $35 million in notes, according to the bankruptcy filing.

Unsecured creditors are at higher risk in bankruptcy cases than other claimants because their investments are not secured by assets as collateral, and typically they are paid last in such cases.

Apollo Investment Management is an affiliate of Apollo Global Management, a buyout firm run by investor Leon Black.

Standard & Poor’s lowered its rating on EuroFresh’s senior subordinated discount notes to ‘D’ from ‘C’ following the bankruptcy filing.

In the filing, EuroFresh, based in Willcox, Arizona, blamed “escalating losses” on tomato production due to an outbreak of tomato chlorotic dwarf viroid, known as viroid.

Privately held EuroFresh sells tomatoes and cucumbers, grown in greenhouses, to U.S. grocery stores, restaurants, brokers and distributors, according to its website, under the labels “Eurofresh Farms” and “Sweet Star.”

EuroFresh said in the filing that in 2007, the viroid and related issues led to a loss of 6.3 million pounds of fruit and $6.2 million in revenue. It said that in 2008, viroid resulted in a loss of 24.5 million pounds of fruit and $26.2 million in revenue.

The company said in the filing that it had also been difficult to find enough workers, particularly at its remote Willcox facility.

It said that it had relied on immigrants with work authorization, “labor contractors and also experimented with a program of busing refugees from Tucson, Arizona, to the Willcox facility in 2007.”

EuroFresh said that it “began to experience a labor shortage in 2006 and 2007 as changes in immigration policy made it more difficult to retain their legal immigrant labor pool as the pool of illegal immigrant labor in the area surrounding the facilities shrank, creating higher overall demand for legal immigrant labor.”

In the filing, the company listed assets of between $50 million and $100 million, and debts of between $100 million and $500 million.

EuroFresh had sales of $177.1 million in 2008, according to the court filing.

The case is In re: EuroFresh Inc et al., U.S. Bankruptcy Court For the District of Arizona, No. 09-07970. (Reporting by Phil Wahba; Additional reporting by Chelsea Emery; Editing by Leslie Gevirtz, Toni Reinhold)

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