Tuscaloosa, Alabama, U.S.A.-based SouthFresh Aquaculture has filed for Chapter 11 bankruptcy, becoming the latest chapter in the saga of the struggling U.S. catfish sector.
In a 28 January court filing, the company listed USD 10 million to 50 million (EUR 8.8 million to 43.8 million) in assets and the same amount in liabilities. SouthFresh Chief Financial Officer Justin Funk, who authored the filing on behalf of SouthFresh, wrote that the company’s processing plant, which it built in the early 2000s in Eutaw, Alabama, had lost nearly USD 12 million (EUR 10.5 million) over the past seven years. The losses had offset the company’s profitable feed mill and seafood sales divisions, according to SouthFresh Chief Financial Officer Justin Funk, who authored the filing on behalf of SouthFresh.
“Despite SouthFresh’s best efforts to position the processing plant as a profitable division, the processing plant has regulatory recognized significant year-end losses due to … regulatory and economy challenges in the catfish industry,” Funk wrote.
Funk identified those challenges primarily as the growth of imports and a shift in taste amongst domestic consumers. He acknowledged the industry’s efforts to stem the tide of catfish-like pangasius from Vietnam through political ends had not been successful.
“In an attempt to stem a rising tide of catfish imports, legislation was passed causing the United States Department of Agriculture (USDA) to assume inspections of catfish and catfish imports from the Food and Drug Administration (FDA) and implement a stricter inspection process. Unfortunately, the stricter protocols only exacerbated the industry decline by forcing the domestic processors to retool and upgrade their plants to meet USDA guidelines,” Funk wrote. “These issues, coupled with the declining average market price of domestic live catfish that has resulted therefrom, has caused SouthFresh’s catfish farming, processing, seining, and hauling operations to suffer substantial net income losses. As a result, SouthFresh has closed down catfish farming operations in both Mississippi and Alabama.”
The company hopes to restructure thanks to debtor-in-possession financing from its parent organization, the Alabama Farmers Cooperative, made possible through the Chapter 11 filing. The AFC, which has previously loaned SouthFresh approximately USD 12 million (EUR 10.5 million) in standard financing, has agreed to extend an additional USD 3.5 million (EUR 3.1 million) in financing at a fixed interest rate of seven percent, subject to an increase of two percent if SouthFresh defaults on the loan. The loan, which is subject to approval by the court, has a maturity date of 28 January, 2020.
Funk said he believed the loan will enable the company to operate “with minimal disruption or loss of value” and “is necessary to provide SouthFresh with a reasonable opportunity to maximize value in this Chapter 11 case.”
SouthFresh produces a full line of catfish products including whole fish, fillets, strips, nuggets, as well as value-added and custom products, while in addition to catfish feed, its feed mill produces horse, cattle, swine, deer, game fish, and turtle feed. Its feed is distributed throughout the U.S. and exported abroad, the company said. Its seafood division sells oysters, crawfish, alligator, frog legs, tilapia, tuna, snapper, grouper and red drum.
The company has 230 employees, with 175 working in the processing plant, 30 in its feed mill, and the remaining 25 employed in corporate operations.
In 2017, it achieved the Global Aquaculture Alliance’s three-star Best Aquaculture Practices certifications for its catfish feed mill and processing plant.
Calls by SeafoodSource on Tuesday, 29 January to executives at SouthFresh for comment were not immediately returned.
