Iowa bankruptcy filing may halt Pure Prairie debt payment case

By KAALTV

Possible delay in Pure Prairie debt case

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(ABC 6 News) – Creditors, debt managers, and a Minnesota judge are stymied by four businesses’ attempt to claim more than $2,600,000 ahead of the rest of Pure Prairie Poultry’s pack of creditors.

According to a motion hearing Thursday, Nov. 14, Minnesota district judge Allison L. Krehbiel may not be able to rule on debt administration company Light House Management Group’s requests for time and contract terminations until an Iowa bankruptcy filing is resolved.

“I’m not quite sure how to proceed,” Krehbiel said in court. “If I agree … that I don’t have jurisdiction, I’m not sure I can even issue an order about that. But I will do my best to issue something to let you know which way to proceed.”

On Nov. 7, Wisconsin business Tri-State Poultry LLC, broiler producer Ekelr, LLC, and member Lee Frie filed a collective claim for $2,635,561.28 from Pure Prairie Poultry, along with Minnesota carrier Larry Falk.

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Their attorney, James Jorissen, argued Thursday that Krehbiel has no authority to make decisions about Light House’s requests until the Iowa bankruptcy court accepts or denies that claim.

It’s normal for a bankruptcy filing to put a pause on other civil cases, University of Minnesota Law professor Edward Adams said.

However, for many of Pure Prairie’s creditors, time is of the essence.

Why does the delay matter?

Generally when an assignee takes on debt management, creditors’ ability to seize assets and demand payment is “stayed,” or paused for 30 days, according to court documents.

Creditors are likely to resist Light House LLC’s request for additional time, Adams said, because Pure Prairie Poultry’s plant and equipment are losing value by the day.

For creditors, the question is whether that value is declining faster than their chance to recoup any of the money they’re owed.

“They believe that the value of the assets is going to be less in 2025 than it is today. The classic reason,” Adams said. “Let’s say there’s a machine, and that machine isn’t being maintained. If it’s not being maintained, and there’s other machines that are being produced, better, and cheaper, the value of what you have is declining. In a real sense, because what you have isn’t being maintained, and because people want the cheaper, better machine.

“A better example is a plane. Every time the plane takes off and lands, the value of it goes down. Not by a lot. But every time I use it, the value declines.”

Light House LLC and Pure Prairie aren’t operating the poultry plant, according to court documents. But at least one creditor is still pouring money into the asset.

Clint Cutler, the attorney representing major creditor Community Bank & Trust, said the bank has advanced Pure Prairie money to pay for the poultry plant’s utilities and upkeep.

The bank has a mortgage on the property, according to court documents.

They want the debt proceedings resolved quickly, Cutler said, and plan to file a request to dismiss Tri-State Poultry and co.’s bankruptcy case.

Judge Krehbiel took all arguments presented Nov. 14 under advisement. There was no ruling on the motion to stay creditors until March of 2025, nor the termination of growers’ contracts.

How did we get here?

In early October, Pure Prairie Poultry CFO George Peichel filed for bankruptcy and informed the State of Iowa that the company could not feed the 1.3 million broiler chickens it paid Iowa farms to raise.

Court documents revealed that the business owed between $100 million and $500 million to 937 different creditors. Employees were also laid off, and have not received their final paychecks.

The Iowa chickens were eventually euthanized. Buyers interested in the birds backed off after creditors said they would seek money from anyone who bought the chickens.

Chickens at farms in Wisconsin and Minnesota starved, and some resorted to cannibalism.