Beruflich Dokumente
Kultur Dokumente
In Re: )
)
ADAK FISHERIES, LLC, )
an Alaska limited liability company, ) Case No. 09-00623 DMD
)
Debtor. ) Chapter 11
________________________________________________)
Debtor Adak Fisheries, LLC, (Debtor) applies to this Court for authority
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to sell to Adak Seafood, LLC, (Buyer) the plant facility at Adak, Alaska, and associated
equipment and assets, for $488,000 cash to the bankruptcy estate plus assumption of
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approximately $6.7 million of debt owed to Independence Bank (the “Bank”), on the
terms and conditions set forth in the Asset Purchase Agreement (APA) attached hereto as
Exhibit A, and as modified herein. The proposed sale shall be free and clear of the liens
and interests of all entities other than the Bank, and those claims and interests (but not
those of the Bank) shall attach to the proceeds to the same extent and in the same order of
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The Buyer is a newly created Delaware limited liability company
affiliated with Drevik International, a long time customer of Debtor’s operation. Kjetil
Solberg, former owner of the Debtor, also has a relationship to the Buyer.
Background
national, to build and operate a fish processing facility in Adak, Alaska, on property
leased from Aleut Enterprises, LLC (Aleut), a subsidiary of the Aleut Corporation, the
then with Icicle Seafoods, and then with Aleutian Spray Seafoods, Inc. (ASF). In late
2004, when Solberg and ASF were 50-50 owners of Debtor, ASF learned that Ben
Stevens, son of the then U. S. Senator, claimed a 25% stock option in the Debtor. This
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considerable public attention at the time because Ben Stevens also sat on Aleut’s board of
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directors.
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1
In the mid-1900's the federal government began the process of transferring
ownership of the decommissioned Navy base on Adak to Aleut Corporation. In 1997,
Aleut Corporation created a subsidiary, Aleut Enterprise Corporation, to manage
conversion of the base to civilian use. The base’s dock became the site of the fish
processing facility operated by the Debtor.
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On October 17, 2005, Solberg purchased ASF’s 50% membership interest
in the Debtor for $5 million, payable over time. In 2007, officers Dave Fraser and Jim
Prince each exercised options and acquired 5% membership interests in the Debtor.2
2007 was a good year for Debtor: it enjoyed revenues of $32.3 million and
EBITDA of $2.0 million. 2008 was not a good year:3 although cod prices were good,
many fishermen sold their product that year to Trident Seafoods, which had installed a
floating processor in Adak that year. 2009 was also a bad year,4 largely because cod
In June 2009,5 it became clear that Solberg would be unable to pay ASF
the balance due ASF for the purchase of ASF’s interest in Debtor, and so, effective
August 3, 2009, Solberg turned over his entire membership interest in Debtor to ASF.
Having by then conducted its due diligence, ASF determined that the membership
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interest had no value, and on August 7, 2009, sold its interest for a nominal sum to
Pacific Pelagic Group, LLC, a Washington LLC owned by John Young. Young is a
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2
CFO William Matthew Tisher also acquired a 5% interest through an assignment
of a stock option, but because of a dispute concerning that assignment, Tisher voluntarily
relinquished his membership interest in 2009.
3
Debtor’s unaudited financials for 2008 reflect $20.2 million of revenue, negative
$2.3 million of net income, and EBITDA of negative $.4 million.
4
Debtor’s unaudited financial statement for 2009 YTD through June reflect $10.8
million of revenue, negative $1.7 million of net income, and negative $.7 million of
EBITDA.
5
Cod sales are responsible for about 80% of Debtor’s revenues, and are therefore
the backbone of Debtor’s business. The cod season runs from mid-February through
March, so by June, the most profitable part of Debtor’s year is completed.
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Seattle attorney who had represented ASF in the litigation involving the Stevens option,
and other matters. Thus, by August 2009, Debtor was owned 90% by Pacific Pelagic
Providence, Rhode Island, who is owed approximately $6.7 million, secured by broad-
form security documents. During 2009, Independence Bank has collected most of
Debtor’s fish revenues and has controlled the disposition of those funds. On September
1, 2009, the Bank commenced an action in federal district court in Anchorage to appoint
individually, and by the Debtor while Solberg was in control of the Debtor. By the time
that suit was filed, Debtor’s management had determined that the company was not
viable as an ongoing entity, and on September 11, 2009, this Chapter 11 petition was
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filed.
The lease between Aleut Enterprise, LLC, and the Debtor, is central to the
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proposed sale. The first lease between the parties was entered into in 2001. The current
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lease is dated as of January 1, 2006, and by its terms expires December 31, 2009. The
lease provides for five additional options to extend, with each extension being for five
years. Notice of renewal must be given more than 120 days prior to the expiration of the
lease term, i.e. before September 2, 2009. Debtor did not give that notice: Debtor has no
intention of continuing operations, and perceives that the lease is burdensome to a new
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Shortly after filing this Chapter 11 petition, Debtor moved to reject the
Aleut lease under Section 365. The hearing on that motion to reject has been continued
to November 9, 2009, at the same time as the hearing on this motion to sell.
The offer that is the subject of this motion came to the Debtor’s attention
in an unusual manner. Rather than the Buyer or the Bank approaching Debtor informally
to inquire if Debtor would sponsor the offer, the Bank filed a motion on shortened time
for approval to sell the plant, Docket No. 40. The Bank’s motion was the first that
Debtor heard of the offer. At Docket No. 54, this Court denied the shortened time
request on the ground that the Bank did not own the plant and therefore lacked standing
to sell it. Later, the Bank supplied the Debtor with the written APA.
Delaware limited liability company. Until 2005, Debtor conducted its business under the
name Adak Seafoods, LLC, an Alaska limited liability company. The Alaska entity,
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(Seafoods - plural) was controlled by Solberg, and was dissolved December 15, 2005.
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See Exhibits B and C hereto. The Delaware entity (Seafood - singular) was created
September 18 concerning the proposed sale, see Exhibit D. Willig’s response, Exhibit F
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1. Who is “Adak Seafood, LLC”? There is an Alaska LLC called
“Adak Seafoods LLC that voluntarily dissolved in 2006 - see attached. Is
this the same entity?
Island lawyer, the person identified in the APA as the contact person for the Buyer.
Celeste indicated that the Buyer was affiliated with the same Norwegian fish buyer,
Drevik International, who had been a major customer of the Debtor, and he also
acknowledged that Kjetil Solberg would be involved in the operation of the plant if the
purchase was successful. He declined to give any further information than this as to
ownership or management of the Buyer, and he also declined to give any information
concerning the financial ability of the Buyer to close. Mr. Celeste’s rationale was that
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because this sale was all cash at closing to the estate net of secured debt, the Debtor need
not concern itself with the identity or financial capability of the Buyer.
The assets to be sold are detailed in Section 1.1 of the APA, and consist of
the inventory, equipment, permits, owned intellectual property, plans and diagrams,
insurance claims, cash on hand, and receivables; however, Section 1.3 states that assets
excluded from the sale are membership interests held by the Debtor (of which there are
none), avoidance and state law actions, instruments, etc., and defined Claims. Also
included in the sale is the Eskimo Princess, a fishing vessel titled to T&S Fisheries LLC.,
(d) Buyer paying $231,000 to the IRS and $147,000 to the State of Alaska,
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6
Defined within APA as the Aleut lease, the Pollock Agreement, and the Offshore
Pollock Agreement.
7
$10,000 + $231,000 + $147,000 + $100,000 = $488,000. See Exhibit G., emails
dated October 9, 2009, to Mr. Celeste.
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three Bank loans totaling approximately $6.7 million: i.e., total consideration of about
$7.2 million.
Perhaps the thorniest aspect of the APA is that by its terms it requires an
assumption and assignment of the Aleut lease. As set out in Aleut’s memorandum,
Docket No. 85, with respect to the Debtor’s motion to reject that lease, Aleut claims the
Debtor is not prepared at this point to concede that the above amounts are
the proper cure figures, but it is apparent that the cure cost could be very substantial.
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It is also apparent that there is no “room” in the Buyer’s offer to cure the
defaults in the Aleut lease, even if the cure figures are a fraction of what the Aleuts
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claim. Further, even if the Aleut lease were to be assumed, the lease expires by its terms
December 31, 2009 - obviously a pointlessly short lease term from the Buyer’s
standpoint. The lease does contain a renewal option, but as indicated above, the renewal
deadline has passed. And, although Debtor cannot speak for the Buyer, in the Debtor’s
For these reasons, Debtor has urged Buyer to withdraw the assume and
assign requirement. For whatever reason, Buyer has declined to do so. The parties do
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recognize, however, that if new lease terms can be negotiated between the Buyer and
Aleut before the November 9, 2009 hearing on this motion, that renegotiation will moot
the issue of whether assumption and assignment is in the best interests of the estate, or
whether it can be accomplished at all, let alone whether assumption is in the best interests
of the estate.
The parties also agree that the proposed sale needs to close quickly.
Section 8.4 of the APA calls for a Closing up to ninety days after a sale order, but that is
impractical because the high fishing season starts in January 2010, so the plant needs to
be up and running before then. The parties have therefore agreed to a Closing date no
There are recorded IRS liens against the Debtor as follows: $3,102.20
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recorded June 23, 2009; $9,466.47 recorded July 6, 2009; and $21,642.97 recorded
There are also recorded State of Alaska liens in the amount $6,864.52
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recorded July 27, 2009, and $11,650.00 recorded April 14, 2009.
The $488,000 in sale proceeds will be more than sufficient to pay these
liens.
There are UCC-1's of record in favor of Pentech Financial Services and its
assignees, but Debtor is advised that these should have been released in the wake of
subsequent Independence Bank loans. There are also some individual equipment UCC-
1's in favor of several Toyota entities, and those secured claims will either be paid off or
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the equipment excluded from the sale. Aleut Enterprises, LLC has a UCC-1, but Debtor
assumes that any obligation secured by this UCC-1 will be eliminated as part of the
All entities holding UCC-1's of record will be given notice of the sale.
Additional information
Until late August, 2009, Debtor had not three, but four, outstanding loans
with the Bank. In addition to the three loans descirbed in the Asset Purchase Agreement,
there was an “EXIM” loan, which was a $5 million line of credit established in March,
2009. In late August, 2009, the unpaid balance of that loan was approximately $324,000.
Unknown to Debtor, Drevik International paid off that loan, despite Drevik having no
legal obligation to do so, or any expectation or understanding with the Debtor that Drevik
might do so. Drevik was a substantial customer of the Debtor, but the payment was not
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on account of any obligation to the Debtor. The Bank has informally advised that Drevik
made the payment in order to preserve its relationship with the Bank, whatever that
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means, and apparently as a condition of the Bank supporting this offer.8 The Bank has
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advised that Drevik made the payment to the Bank without any expectation of repayment
Debtor invites the Bank and the Buyer, before the November 9 hearing, to
provide complete details as to this transaction. Debtor also invites the Bank, the Buyer,
8
Debtor does not purport to understand all the nuances of this transaction,
particularly given that when Debtor asked the Bank, “Who is Adak Seafood, LLC?”, Mr.
Willig responded that “Independence Bank believes it is a group of Norwegian investors.
The Purchase and Sale Agreement states that is a Delaware Corporation.” Exhibit F.
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and Mr. Solberg to describe Mr. Solberg’s relationship to the Buyer and to management
The Buyer’s offer is the only formal offer received to date by the Debtor.
Debtor believes that there may be another offer coming, from Trident Seafoods, and if
that offer is received, Debtor will file a supplemental motion to bring that offer for
consideration at the November 9 hearing. Debtor does not believe that the Buyer’s
proposed offer is viable if the assumption and assignment requirement is not waived, but
for the reasons discussed above, that requirement may well be waived.
Debtor also believes that the creditors and bankruptcy process would be
well served by the Buyer providing full details as to the ownership and proposed
management of the new operation, and by Buyer’s affiliates and the Bank disclosing
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their relationships between each other, including the particulars of the $324,000
payment.
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9
Mr. Willig’s letter dated September 23, 2009, Exhibit F, states that
“Independence Bank does not know Mr. Solberg’s connection [to the Buyer].” It now
appears to the Debtor that Mr.Solberg may be in complete charge of the Buyer’s new
operation.
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Cabot Christianson
List of Exhibits
A - Asset Purchase Agreement
B - Adak Seafoods, LLC Biennial Report
C - Adak Seafoods, LLC Articles of Dissolution
D - Delaware Division of Corporations information re: Adak Seafood, LLC
E - Christianson email dated 9/18/2009
F - Willig letter dated 9/23/2009
G - Christianson emails 10/9/2009
The undersigned hereby certifies that on October 9, 2009, a true and correct copy of this application was
served on:
-- US Trustee
- Marc Wilhelm,Esq.
- Micheal Mills, Esq.
- Paul W. Paslay, Esq.
- Christopher Mulhearn, Esq.
- Diane Vallentine, Esq.
- William D. DeVoe, Esq.
- John Siemers, Esq.
by first class regular mail, to the address noted above, or by electronic means through the ECF system as
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