Mauna Loa
catching up on
missed payments

The company has paid two-thirds
of about $3.2 million owed
to ML Macadamia Orchards

By Dave Segal

ML Macadamia Orchards LP, which had threatened a lawsuit to collect $3.2 million owed by the company contracted to buy its nuts, said it has now received nearly two-thirds of those delinquent payments.

Dennis Simonis, president and chief operating officer of the Big Island grower of macadamia nuts, said that Irvine, Calif.-headquartered Mauna Loa Macadamia Nut Corp., the exclusive purchaser of those nuts, has paid all but $1.2 million and that the balance of the money owed for the fourth quarter was paid off last week. The amount remaining due is the majority of the $1.8 million that is owed for the first quarter.

"I don't think we'll have to resort to litigation," Simonis said. "We're receiving what I would call regular weekly installments. They're paying as much as they can, as quickly as they can."

Mauna Loa Chief Financial Officer Darrell Askey said the company had difficulty paying ML Macadamia after Sept. 11 because business became soft and some Hawaii vendors were not able to purchase the nut products. Askey stressed, though, that Mauna Loa has made a good-faith effort to make regular payments even though the amounts have been less than what was due. As an example, he said that Mauna Loa wired M.L. Macadamia $350,000 on Monday.

"Our expectation is that in 30 days or less we'll be current with them," Askey said. "We've kept them apprised where we are and it's been a very positive enhancement to our relationship to have conversations with them. We're optimistic things are improving."

Simonis also said the two sides have mended their relationship and cited a change in Mauna Loa management as one of the reasons. However, he did point out that Mauna Loa failed to live up to its contract.

"We deliver nuts for an entire quarter and they're supposed to pay 30 days after the end of the quarter," he said. "So they've had quite a bit of time to pay but unfortunately didn't have the cash to pay by the due dates of January 30 and April 30. But I think it would be fair to say they're paying us now as quickly as they can."

ML Macadamia got off to a rocky relationship with Mauna Loa after Mauna Loa was sold by C. Brewer & Co. to the San Francisco-based Shansby Group partnership in September 2000.

In June 2001, ML Macadamia won a court decision requiring Mauna Loa to purchase all of ML Macadamia's nuts, regardless of condition, as required in three of five purchase contracts. The other two contracts allow for the deduction of unusable nuts in calculating payments. A Circuit Court judge in Hilo ruled that Mauna Loa had withheld $908,000 for substandard nuts in violation of one of the three nut purchase contracts. Mauna Loa was ordered to pay that amount to ML Macadamia, plus interest and a portion of ML Macadamia's legal fees. The total settlement, which amounted to about $1.2 million, was paid off in September and October.

Then, on Jan. 30, 2002, ML Macadamia received only $2.4 million of $5.4 million it was owed for nuts purchased by Mauna Loa in the fourth quarter. ML Macadamia issued a notice of nonperformance to Mauna Loa and was subsequently paid $1.6 million, leaving $1.4 million still unpaid. Mauna Loa was issued a Notice of Default on March 11.

Mauna Loa subsequently missed a $1.8 million payment due April 30 for nuts delivered in the first quarter.

The remaining $1.4 million owed from the fourth quarter, which was paid off last week, and the $1.8 million due for the first quarter had prompted ML Macadamia to threaten legal action.

Now, it looks like the legal action won't be necessary.

"We feel confident we're going to be paid in the next month or so," Simonis said.

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