Sunday, June 12, 2005

Bankrupt Kauai shrimp
farm finds local buyer
for its remaining assets

The chief executive of one of the state's largest charitable foundations is bidding for the assets of a bankrupt shrimp farm on Kauai. But a Louisiana-based fish-food maker who supplied feed to the farm has objected to the deal.

Kelvin Taketa, chief executive of the Hawaii Community Foundation, has surfaced as a buyer for the assets of Ceatech USA Inc., which filed for bankruptcy protection in March after years of lackluster financial performance.

But Burris Mill & Feed Inc. of Franklinton, La., claims that Taketa's $389,000 bid is too low and questions whether Ceatech did enough to market its assets before striking a deal with Taketa's firm, Sunrise Capital LLC.

Ceatech's proposed sale and Burris Mill's objection set the stage for a showdown later this month before U.S. Bankruptcy Judge Lloyd King.

Since it filed for bankruptcy protection, Ceatech has continued to employ a skeleton staff to operate its shrimp hatchery in the state-owned Kekaha Agriculture Park. But the company is expecting to run out of cash by the end of the month.

At that point, Ceatech will owe the state payment on leases with the Hawaii Department of Agriculture, which manages the park.

If Ceatech can't pay and defaults on its leases, the improvements the company has made to the property and the leases themselves will most likely revert to the state, court records indicate.

To avoid that, Ceatech has asked the bankruptcy court for permission to sell its assets, including the leases, for $389,000 to Sunrise Capital. Registered with the state in January, Sunrise appears to have had its sights set on Ceatech for some time. Bankruptcy court documents say that Sunrise approached Ceatech before the bankruptcy filing and began its due diligence of the farm. The records also state that Sunrise has the financial wherewithal to make the lease payments.

Beyond that, little has been made public about Sunrise or its plans.

Taketa said the company is a private venture and not related to the Hawaii Community Foundation, a statewide charitable services organization that manages $265 million in assets.

Although Taketa is listed as Sunrise's sole member in the company's registration with the state, he said other partners probably will be involved. Nonetheless, Taketa declined to identify the other partners or comment on Sunrise's plans, saying it was premature to discuss the venture before the bankruptcy court had ruled on the request.

King is scheduled to hold a hearing on the sale on June 20.

According to court filings, the proposed sale has been blessed by Ceatech's secured creditors, Bank of America and Hibiscus Ltd., which would maintain their secured status if the sale goes through. State officials also have yet to raise any concerns, documents indicate.

So far, the only significant objection to the deal appears to be that of Burris Mill. A purveyor of specialized feed for aquaculture farms, Burris Mill claims to be owed $280,000 by a Ceatech affiliate.

Burris Mill further claims that Ceatech has failed to present evidence that the $389,000 price is fair or that Ceatech adequately marketed the property before making the deal with Ceatech.

Ceatech has fired back saying that it has been looking for investors or a buyer since before its bankruptcy.

Furthermore, Ceatech points to a 2003 appraisal which places the property's liquidation value at $389,000. According to that appraisal, the fair market value of the property, or what it might fetch for a buyer who was not in bankruptcy, was $931,000.

Regardless of whether Ceatech and Sunrise can surmount the feed company's objections in bankruptcy court, the deal faces another hurdle. According to Ceatech, transferral of the leases depends upon approvals by the state Department of Land and Natural Resources, the state Department of Agriculture and the Hawaii Agriculture Development Corp. Sunrise has begun the process of obtaining the approvals but has not yet secured them.

"There is a risk that the state of Hawaii and its agencies will not consent to such a transfer," Ceatech's lawyer, Jerrold Guben, wrote in a motion to the court. "And that is a risk which Sunrise bears."

Belly up

After a heady start followed by years of disappointing financials, Ceatech USA Inc. filed for bankruptcy protection in March. Projected to run out of cash by the end of June, Ceatech now wants to sell its leases and other assets to Sunrise Capital LLC.

Aug. 1997 -- Ceatech USA Inc. announces sale of its common stock on the Over-the-Counter Bulletin Board.

Jan. 1998 -- Company announces lease of 83 acres from Hawaii Department of Agriculture

Feb. 1999 -- First shrimp harvest announced.

Oct. 1999 -- Company says it is nearing its production capacity; Chairman Ronald Ilsley says, "We are finally turning an important corner."

Sept. 2001 -- Citing "sustained net losses since inception," Ceatech expresses doubts about its continuing viability.

Aug. 2003 -- Company announces resignation of outside auditors.

Nov. 2003 -- Ceatech delisted by Over-the-Counter Bulletin Board for failure to submit quarterly report with securities regulators.

April 2004 -- Virus infects aquaculture ponds, leading company to kill 20 million shrimp; Ceatech reports losses between $1 million and $2 million.

March 2005 -- Ceatech files for bankruptcy protection.

May 2005 -- Firm asks bankruptcy court for permission to sell assets to Sunrise Capital.

Sources: Bloomberg News; Star-Bulletin archives.

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