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Records: Yarnell’s in straits since ’01

MICHAEL LIPKIN

ARKANSAS DEMOCRAT-GAZETTE

Yarnell’s Ice Cream Co., which borrowed $7 million from state agencies before it stopped operations last Thursday, was in dire finan- cial straits several times in the past decade, according to documents provided by Ar- kansas Development Finance Authority. The documents show

Searcy-based Yarnell’s — which says it is currently soliciting offers to buy the company — was put up for sale in late 2001, and asked the authority for temporary relief from payments on its $2.6 million loan. Gene Eagle, the authori- ty’s vice president of devel- opment finance, wrote in a Dec. 27, 2001, memo to the agency’s board that “the com-

pany is being confidentially marketed for sale.” The memo was a sum- mary of the reasons behind Yarnell’s request for a six- month payment forbearance. “Net worth turned negative at the end of November,” Eagle wrote, adding that cash on hand was “extremely thin.” Then-President A. Rogers Yarnell II quickly withdrew the request, because the for-

bearance would count as a “technical default,” accord- ing to a letter from authority loan officer Chuck Cathey to the agency’s board the next month. Yarnell’s stockholder eq- uity also fell below $4.3 mil- lion in 2002, according to a June 21, 2002, letter from the company to Eagle, which violated the loan agreement. Yarnell asked the authority

for an exemption from the requirement. These documents accom- panied more-detailed reports from Yarnell’s describing the company’s plans to “solve” its situation, but the authority withheld those reports Thurs- day because, the agency said, they would “give advantage to competitors or bidders,” an exception to the Arkansas

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Freedom of Information Act. “Although operations have ceased, efforts to market the company are ongoing and sev- eral entities have expressed in- terest in acquiring and operat- ing the facility in Searcy,” Eagle said in an e-mail. “Needless to say, due to the extremely sen- sitive nature of these negotia- tions,” the authority could not provide the documents. A Yarnell’s spokesman con- firmed Eagle’s statement but declined to comment further.

Yarnell’s currently owes about $3.52 million on its outstanding loans, largely the result of bonds issued by the city of Searcy to the company. Yarnell’s defaulted on a prin- cipal and interest payment of $77,065.86 due July 1, the day after it stopped producing ice cream. 150 workers lost their jobs at the Searcy plant, along with another 50 employees elsewhere. The family-owned business was started in 1932.

Eagle said the authority made the payments for Yar- nell’s last week, because as the bond’s guarantor it was legally obligated to do so.

“They didn’t have the cash,”

Eagle said. “If they don’t have

it, we have to pay it. It’s anoth-

er thing that’s added to what they owe us.” That payment came from an insurance fund seeded by companies that borrow from the authority, Eagle said, and was not state money. The fund has about $18 million.

Yarnell’s loans date to 1994 when the city of Searcy issued $4.6 million in bonds to the company. Two million dollars was guaranteed by the Arkan- sas Economic Development Commission, the rest by First Commercial Bank, which was bought by Regions Financial

Corp. in 1998. Regions decided not to renew its obligation in 2000, prompting the authority to step in. A balloon payment was due in 2006 on the 1994 loan, which the authority ex- pected Yarnell’s could not af- ford, so the agency refinanced it to give the company more time, Eagle said. Yarnell’s now owes the authority $1.96 million and the commission about $100,000 on the 1994 loan. The commission also lent Yarnell’s $1.5 million in mid- 2001 as part of a community block development grant. The

commission said Thursday

that Yarnell’s is “behind on its payments,” and still owes $1.45 million. The White County assessor values Yarnell’s land, equip- ment and vehicles at $2.2 mil- lion, more than $1 million less than the company’s combined public debt.

land, equip- ment and vehicles at $2.2 mil- lion, more than $1 million less than the