Receivership of Vertically Integrated Pistachio Grower & Processor

The Bottom Line:

A vertically integrated grower and processor of pistachios, with over $85M in senior secured principal and interest outstanding, became insolvent and operations were paralyzed due to years of mismanagement and an inefficient processing facility. After defaulting on its debt obligations, the company’s senior secured lenders moved to appoint a receiver to protect their collateral, preserve principal, and oversee the winddown or sale of assets.

As Receiver, Stapleton Group, a part of J.S. Held, recovered and distributed over $71M to the secured lenders in approximately ten months. Keys to the successful outcome included:

• Assuming control of all company assets spanning six California properties, including a 40-acre pistachio processing facility with a 39-acre wastewater application site;
• Re-engaging and managing disenfranchised employees through clearly defined goals, expectations, and incentive compensation plan;
• Increasing marketable pistachio inventory poundage and value by nearly 80%, from $21.2M to $37.7M, by identifying and remedying improper inventory management practices and resuming processing operations;
• Quickly identifying and fulfilling the opportunity to generate approximately $14M in incremental liquidity by selling a substantial quantity of low-quality inventory to a rapidly growing, Dubai-based chocolatier with advanced payment;
• Executing a comprehensive process to sell the 40-acre processing facility for $32.5M via public auction by retaining an investment banker, preparing due diligence, and conducting site tours;
• Strategically negotiating with stalking horse bidder to exclude assets and equipment considered redundant from its bid for the processing facility, then auctioned such assets for $1.6M to competitors to improve lender recoveries; and
• Working with counsel to subrogate $14M of grower liens to the senior secured lenders, boosting secured recoveries by the same amount.

Obstacles and Stapleton’s Solutions:

• Improperly stored inventory was deteriorating with a non-operating plant and no sales plan, potentially compromising collateral value and the lenders’ recovery.
  • Stapleton quickly retained, built, led, and aligned incentives with a sales team, enabling the receivership to significantly outperform the company’s sales expectations.
  • Stapleton immediately restarted the idle plant and developed collateral protection and sales plans.
  • Stapleton designed and staffed a plan to clean, organize, and properly store pistachios to preserve collateral value.
  • Stapleton categorized inventory by grade to optimize sale prices for the benefit of the receivership estate. 

• Certain nut inventory was of low quality and only suitable as input for a manufactured product.
  • Stapleton partnered with the company’s sales team to identify and capitalize on a viral chocolate bar trend, “The Dubai Chocolate Bar,” to find customers for the company’s low-quality nuts.
  • Stapleton exceeded the company’s sales forecast, substantially improving the secured lenders’ principal recovery to nearly 100%, by negotiating with an international buyer in Dubai to purchase inventory for $14M with advance payments. 

• Company equipment and miscellaneous assets were spread across six facilities, making it difficult to locate and identify due to inaccurate inventory lists and locational data.
  • Stapleton designed and implemented an exhaustive lotting and tagging process to optimize capital recovery.
  • Stapleton consolidated equipment storage locations to reduce warehousing costs and simplify the sales process.
  • Stapleton successfully negotiated with the stalking-horse bidder to divide assets into two lots for auction, 1) plant and 2) equipment, attracting additional bidders and generating an incremental $1M recovery for the secured lenders.

Contact David Stapleton or Stephen Potts for more information.

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