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UNITED STATES BANKRUPTCY COURT

SOUTHERN DISTRICT OF IOWA




In Re:

NATURAL PORK PRODUCTION II,
LLP,

Debtor and Debtor in Possession.

PO Box 468
Harlan, IA 51537

EIN: 03-0480873

_____________________________________


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Case No.: 12-02872-als11

Chapter 11

Hon. Anita L. Shodeen

DEBTOR’S MOTION FOR ORDER
AUTHORIZING DEBTOR TO
PROCEED WITH LIQUIDATION OF
ROMANIAN INVESTMENT
[Bankruptcy Code Section 363]

No Hearing Set

Natural Pork Production II, LLP, the Debtor and Debtor in Possession herein, by and

through its duly-employed General Reorganization Counsel, Jeffrey D. Goetz, Esq., of the law

firm of Bradshaw, Fowler, Proctor & Fairgrave, P.C., respectfully files its Motion for Order

Authorizing the Debtor to Proceed with Liquidation of its Romanian Investment in Natural Porc

Production Olt, S.R.L., and would show this Honorable Court as follows:

1.

On September 11, 2012 (“Petition Date”) Natural Pork Production II, LLP

(“NPPII” or “Debtor”), filed its voluntary petition under Chapter 11 of the Bankruptcy Code,

which case is now pending before this Court, and in which the Debtor is duly operating as a

Debtor in Possession, pursuant to Bankruptcy Code Sections 1107 and 1108. There is no motion

or application pending for the appointment of a Trustee or Examiner.

2.

This Court has jurisdiction over this matter pursuant to 28 U.S.C. §§ 157 and

1334. Venue in this district is proper pursuant to 28 U.S.C. §§ 1408 and 1409. This is a core

proceeding pursuant to 28 U.S.C. § 157(b)(2). The statutory predicates for relief sought herein

include Code §§ 105(a), 363, and Rules 2002, 6004, 6006 and 9006 of the Federal Rules of

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Bankruptcy Procedures (the “Bankruptcy Rules”).

Background On Natural Porc Production Olt, SRL

3.

The Debtor’s Schedule B(13) discloses the Debtor holds all the outstanding and

issued shares and/or other equity interests in a Romanian business entity legally described as S.C.

Natural Porc Production Olt, S.R.L. and commonly referred to as Natural Porc Production Olt

(hereinafter referred to as “NPPOS”). For purposes of clarity, the initials “S.R.L.” refer to the

Romanian version of what we would describe as a Limited Liability Company.

4.

NPPOS was created and organized under Romanian law as a foreign-owned, single

purpose business entity, formed to purchase, take title to, reconstruct and operate a swine production

facility in Southern Romania. NPPOS is not a Debtor before this Court, or any domestic or foreign

court, in any liquidation, reorganization or insolvency proceeding, and the NPPOS asset in this

Bankruptcy Case is simply NPPII’s investment represented by shares/units in NPPOS. The Debtor

is informed and believes and thereupon alleges that NPPOS is in good standing and in substantial

compliance with all applicable Romanian laws.

5.

In or about May/June 2006, the Debtor, as organizer of, sole investor in and sole

equity interest holder of NPPOS, caused NPPOS to purchase a non-operating, Communist-era hog

farm, in and around Ipotesti Commune, in Olt Judat (County)(hereinafter referred to as the “Ipotesti

Farm”) for approximately $650,000.00. The Ipotesti Farm encompasses approximately 36 acres,

with 13 hog barns, almost a dozen other buildings, including waste management facilities, grain

storage and a lagoon. The Debtor is informed and believes and thereupon alleges that after the fall

of Communism in Romania in December 1989, the Ipotesti Farm operated until approximately

1993, but has not operated since then.

6.

The Debtor is informed and believes and thereupon alleges that the original business

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plan for the Ipotesti Farm was to invest a limited amount of money for demolition and

reconstruction of the facilities, in order to update them to a “modern” swine production facility, and

borrow additional funds to complete the project and operate same. To that end, between June and

December, 2006, NPPII invested approximately $2,105,000.00 in NPPOS for such purposes.

7.

The Debtor is informed and believes and thereupon alleges that after the

approximately $2,105,000.00 additional investment, and after significant progress had been made in

demolition and reconstruction, NPPOS was poised to secure an approximate $7,500,000.00 loan

from a lender in Europe. Unfortunately, beginning in 2007, dynamic and negative changes in the

global hog markets caused the loan transaction to be cancelled, leaving the project in limbo.

8.

With NPPOS having no effective means to generate revenue or income, between

2007 and the Petition Date, it fell upon NPPII to provide “short-term loans” to NPPOS totalling

approximately $314,852.62 for taxes, utilities, security, and professional services in order to

preserve and protect its investment in NPPOS.

NPPOS – Post Petition

9.

Since the Petition Date, the Debtor has continued to provide short-term loans to

NPPOS in order to preserve and protect its investment in NPPOS in the approximate amount of

$89,731.00.

10.

In light of NPPII’s decision to liquidate substantially all of its assets in an orderly

manner, in December, 2012, NPPII caused NPPOS to begin the process of seeking professional

legal, tax/audit, and M&A/Investment Banking advice and counsel in Romania. To that end,

NPPOS engaged Deloitte Audit, S.R.L., Deloitte Tax, S.R.L., Deloitte Consultata, S.R.L. and Reff

& Associates, S.C.A, (the in-house, correspondent law firm at Delotitte in Romania) (collectively,

these several different units in Deloitte’s Bucharest Office shall be referred to as “Deloitte”).

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11.

Deloitte has reviewed and investigated NPPOS’s financial, legal and corporate

affairs, and advised NPPOS of several tax, legal and corporate issues that need to be addressed.

Among the more pressing of these issues are building tax and environmental concerns. To that end,

Deloitte has assisted NPPOS in engaging appraisers and environmental engineers to advise and

counsel it.

NPPOS Pre-Contract

12.

In addition to conducting legal, financial and other due diligence for NPPOS,

Deloitte has also marketed the Ipotesti Farm to potential interested parties. Deloitte marketed the

Ipotesti Farm from approximately March 22nd to April 23rd of 2013. Deloitte approached

approximately ten (10) local and international companies from the same business sector and same

general geographic region.

13.

Deloitte’s efforts have borne success, in that a major European agro/food company,

S.C. Agrikilti S.R.L, dba Carmistin (“Carmistin”), has expressed interest in purchasing the Ipotesti

Farm from NPPOS. To that end, NPPOS and Carmistin have executed a Promissory Sale Purchase

Agreement (“Pre-Contract”), whereby Carmistin proposes to purchase the Ipotesti Farm for

approximately €500,000.00 (Euros), plus VAT (Value Added Tax), plus assumption of several of

NPPOS’s liabilities, including resolution of several tax, financial, legal and environmental

obligations that have an approximate value of €58,000.00. At the foreign exchange rate on May 6,

2013, €500,000.00 equates to $655,700.00. A true and exact copy of the complete Pre-Contract is

attached hereto as Exhibit “A” and is incorporated by reference herein.

14.

To facilitate initiation of the sale process, on April 16, 2013 NPPII, by and through

Lawrence Handlos, its Sole Managing Partner, in its capacity as the Sole Shareholder of NPPOS,

formally resolved in writing to sell the Ipotesti Farm to Carmistin and empower Ms. Cristiana-

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Luminita Popa, to act on behalf of NPPOS in execution of the Pre-Contract and take those other

actions in furtherance of the sale of the Ipotesti Farm. A true and exact copy of the Resolution is

attached hereto as Exhibit “B” and is incorporated by reference herein.

15.

There is no secured debt held against the Ipotesti Farm, and substantially all the

unsecured debt owed by NPPOS is to its parent, NPPII. NPPOS has no executory contracts or

unexpired leases, other than a month-to-month rental agreement for an electric power

transformer.

16.

In addition to being a condition of the Pre-Contract, the Deloitte professionals have

informed NPPOS and NPPII that pursuant to applicable Romanian law, NPPII, in its capacity as

sole equity interest holder of NPPOS, must formally resolve and authorize NPPOS in writing

regarding any transaction that results in the sale or transfer of substantially all of NPPOS’s assets.

To that end, NPPII is inclined to so resolve and authorize NPPOS to do so although such action may

not be required under U.S. Law. However, since NPPII is a Debtor and Debtor in Possession in

what Romanian law considers a foreign “insolvency proceeding,” in order for NPPII’s authorization

to NPPOS to be valid under Romanian law, NPPII must provide an Order of this Bankruptcy Court,

confirming that NPPII has authority, as the sole equity interest holder of NPPOS, to authorize

NPPOS to sell substantially all of its assets.

Relief Requested

17.

The Debtor is seeking a Court order that NPPII is authorized to liquidate its

investment in NPPOS, by instructing NPPOS to sell its sole asset, the Ipotesti Farm, and to

execute all necessary documents and instruments and take all the requisite actions under

applicable Romanian law, to consummate a final Sale Purchase Agreement.

18.

Debtor is informed and believes and thereupon alleges that NPPOS’s proposed

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sale of the Ipotesti farm to Carmistin pursuant to the Pre-Contract is in the best interests of

Debtor’s estate and its creditors for several reasons:

a)

The current European financial crisis has caused many smaller, newer and more

modern hog farming operations to liquidate, and therefore there is a literal glut of hog farms on the

market in the region, which has depressed prices, making it a buyer’s market.

b)

NPPOS’s recent independent third party real estate appraisal by Neoconsult SRL,

opines that the value of the Ipotesti Farm, for building tax purposes, is €725,000.00, which is

substantially closer to Carmistin’s offer than to the amount of money NPPII has invested and loaned

to NPPOS;

c)

The final Site Assessment and Environmental Due Diligence Report prepared by

F&R Worldwide, the environmental engineers engaged by NPPOS, indicates the potential

environmental clean up costs at the Ipotesti Farm could be in the approximate amount of €20,000.00

- €30,000.00, depending on remediation methodology.

d)

Sale of the Ipotesti Farm will eliminate the need for NPPII’s Bankruptcy Estate to

continue to fund the administrative costs necessary to preserve its investment in NPPOS, which is a

depreciating asset in the current market;

e)

The professionals engaged by NPPOS at Deloitte have recommended and counseled

NPPOS that such a sale transaction at this time to Carmistin is in its best interests;

f)

After satisfaction of its financial obligations and costs to wind up and dissolve the

NPPOS asset, the net sale proceeds realized by NPPOS will flow upstream to NPPII as its sole

equity interest holder, thus benefiting NPPII’s Bankruptcy Estate and creditors.

19.

Bankruptcy Code Section 363 governs Debtor’s ability to sell property of the

estate outside of the ordinary course of business. Although this section does not set forth a

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standard for determining when it is appropriate to authorize such a sale, courts have uniformly

held that such a sale should be approved when it is justified by a sound business purpose. See In

re Abbotts Dairies of Pennsylvania, Inc., 788 F.2d 143 (3d Cir. 1986); In re Delaware & Hudson

Ry. Co., 124 B.R. 169 (D. Del. 1991); accord Stephens Industries, Inc. v. McClung, 789 F.2d 386

(6th Cir. 1986); In re Schipper, 933 F.2d 513, 515 (7th Cir. 1991); In re Continental Air Lines,

Inc., 780 F.2d 1223 (5th Cir. 1986); In re Lionel Corp., 722 F.2d 1063 (2d Cir. 1983). The

burden of establishing a rational business justification lies with the debtor. Lionel, 722 F.2d at

1070-71. However, once the debtor makes such a showing, a presumption will attach that the

decision was made on an informed basis, in good faith, and in the honest belief that the action

was in the best interest of the company. See, e.g., In re Integrated Resources, Inc., 147 B.R. 650,

656 (S.D.N.Y. 1992), appeal dismissed, 3 F.3d 49 (2d Cir. 1993).

The Proposed Transaction Satisfies All Applicable Legal Standards

20.

Section 363(b)(1) of the Bankruptcy Code provides, in relevant part, that a debtor

“after notice and a hearing, may use, sell, or lease, other than in the ordinary course of business,

property of the estate.” See also Bankruptcy Rule 6004(f)(1) (“All sales not in the ordinary

course of business may be by private sale or by public auction”). This section generally permits

a debtor to sell property of the estate outside of the ordinary course of its business where the

proposed sale is a sound exercise of the debtor’s business judgment and when such sale is

proposed in good faith. See Stephens Industries, Inc. v. McClung, 789 F.2d 386, 390 (6th Cir.

1986) (“[A] bankruptcy court can authorize a sale of all a Chapter 11 debtor’s assets under

§ 363(b)(1) when a sound business purpose dictates such action”); In re Lionel Corp., 722 F.2d

1063, 1070 (2d Cir. 1983); In re Channel One Comm., Inc., 117 B.R. 493, 496 (Bankr. E.D. Mo.

1990).

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21.

In the instant case, the proposed Sale constitutes a sound exercise of Debtor’s

business judgment and has been proposed in good faith. A sale of the Ipotesti Farm by NPPOS

will aid in minimizing the expenses of the Debtor’s estate, resulting in greater distribution to

creditors.

22.

The Debtor believes this Motion and the transaction contemplated by NPPOS is in

the best interests of the bankruptcy estate and in the best interests of all other interested parties in

this Chapter 11 case.

Sale Free and Clear of Liens

23.

Section 363(f) of the Bankruptcy Code authorizes a debtor to use, sell or lease

property of the estate outside of the ordinary course of business, free and clear of any interest in

such property. This Motion proposes that NPPII authorize NPPOS to sell substantially all of its

assets, free and clear of all interests, liens, claims and encumbrances. Any such interests, liens,

claims and encumbrances would attach to the proceeds from the sale of the Ipostesti Farm (the

“Sale Proceeds”) ultimately attributable to the property against or in which such interest, lien,

claim or encumbrances is asserted.

24.

Under Section 363(f)(2) of the Bankruptcy Code, a sale free and clear of all

interests, liens, claims and encumbrances is permissible if all parties asserting liens on or other

interests in the property consent. The Debtor is providing proper notice of this Motion to all

interested parties and the Inter Creditor Committee (“ICC”). Provided that no creditors or

interested parties object to this Motion and the proposed sale transaction, Section 363(f)(2) will

be satisfied. See, e.g., Veltman v. Whetzal, 93 F.3d 517, 521 n.5 (8th Cir. 1996) (in a Chapter 7

case, stating that “some courts have found implied consent, however, when a party with an

interest in the bankruptcy estate fails to object after receiving notice of the sale under subsection

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363(f)(2)”) (citing In re Tabone, Inc., 175 B.R. 855, 858 (Bankr.D.N.J.1994); In re Elliot, 94

B.R. 343, 345 (E.D. Pa. 1988)).

25.

Under Section 363(f)(4) of the Bankruptcy Code, a sale free and clear of all

interests, liens, claims and encumbrances is permissible if the interest of any entity is in bona

fide dispute. Under Section 363(f)(5) of the Bankruptcy Code, a sale free and clear of all

interests, liens, claims and encumbrances is permissible if any party asserting an interest in the

assets could be compelled to accept money satisfaction of such interest in a legal or equitable

proceeding. The Debtor submits that to the extent the ICC asserts security interests in the

Debtor’s investment in NPPOS and does not consent under Section 363(f), a sale free and clear

of its interests will still be permissible because, as to the ICC, their interests, or the amount of

their interests, are in fact the subject of a bona fide dispute, and they could be compelled to

accept a money satisfaction of their interests in a legal equitable proceeding.

A Proposed Sale Does Not Establish Any Sub Rosa Plan of Reorganization

26.

A sale of assets may not be approved where such sale, rather than merely

changing the composition of the debtor’s assets, either restructures the right of creditors or

predetermines the rights of creditors under any future plan of reorganization. See In re Braniff

Airways, Inc., 700 F.2d 935, 939-40 (5th Cir. 1983); In re Continental Air Lines, Inc., 780 F.2d

1223, 1227-28 (5th Cir. 1986).

27.

In Braniff, the Fifth Circuit held that an agreement between the debtor and its

creditors established a sub rosa plan of reorganization because, among other things, the

agreement: (i) required that any future plan of reorganization allocate certain assets only to

employees, shareholders or unsecured creditors of the debtor; (ii) required the secured creditors

to vote a portion of their deficiency claim in favor of any future plan of reorganization approved

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by a majority of the unsecured creditors’ committee; and (iii) provided for the release of claims

by all parties against the debtors, its secured creditors and its officers and directors. Braniff, 700

F.2d at 939-40.

28.

Unlike Braniff, the sale transaction contemplated by this Motion will not

restructure the rights of Debtor’s creditors or predetermine the rights of such creditors under any

future plan of reorganization.

29.

Furthermore, Debtor has articulated sound business justifications for seeking

authorization to liquidate its investment in NPPOS, rather than as part of a plan. A Section 363

motion should be approved if it is based on good business reasoning. In re Lionel Corp., 722

F.2d at 1070; In re George Walsh Chevrolet, Inc., 118 B.R. 99, 101–102 (Bankr. E.D. Mo. 1990)

(Court considered some of the following factors: whether all parties in interest received

reasonable notice; whether the purchase price is fair and reasonable; whether there is a sound

business reason for the sale; and whether the proposed sale unfairly benefits insiders or

proprietary purchasers, or unfairly favors a creditor or class). All such factors have been met

here.

30.

The Purchase Price is a fair offer for the Ipostesti Farm at this time. Given the

current economic climate, Debtor believes it would be imprudent to ignore such an attractive

offer now when the value of the Ipotesti Farm could be adversely affected or deteriorate in the

coming months prior to plan confirmation. Basically, Debtor is taking the conservative approach

that a “bird in hand is worth two in the bush.”

Sale Price and Terms were Negotiated at Arm’s Length and in Good Faith

31.

The Purchase Price and Sale Terms were negotiated and have been and are

undertaken by NPPOS and Carmistin at arm’s length, without collusion and in good faith within

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the meaning of Section 363(m) of the Bankruptcy Code, and Debtor accordingly requests that the

Court determine that its decision to authorize NPPOS to sell the Ipotesti Farm was conducted in

good faith within the meaning of Section 363(m) of the Bankruptcy Code and that Seller and

Purchaser are entitled to the protections of Section 363(m) of the Bankruptcy Code. See In re

Apex Oil Co., 92 B.R. 847, 874 (Bankr. E.D. Mo. 1988).

32.

In Debtor’s view, the proposed liquidation of its investment in NPPOS by

authorizing the sale of the Ipotesti Farm represents substantial value to Debtor’s estate inasmuch

as it provides favorable terms for the disposition of the Ipotesti Farm at a price that represents

fair and reasonable consideration having a certain value. See id. at 869. See also Mellon Bank,

N.A., v. Metro Communications, Inc., 945 F.2d 635 (3d. Cir. 1991) (reasonably equivalent value

under the Bankruptcy Code).

Reduction or Elimination of 14-Day Stay Under Bankruptcy Rules 6004(h) and 6006(d)

33.

Time is of the essence in approving and closing the Sale, and any unnecessary

delay in closing the Sale could result in the collapse of the Sale. Accordingly, this Court should

waive the 14-day period staying any order to sell or assign property of the estate imposed by

Bankruptcy Rules 6004(h) and 6006(d).

CONCLUSION

Based upon the authorities and facts detailed above, Debtor submits that the Court should

approve the Motion. Such relief is warranted because Debtor has shown that liquidation of its

investment in NPPOS by authorizing the sale of the Ipotesti Farm is in the best interests of

Debtor, its estate and creditors, and because such decision was reached in the exercise of

Debtor’s sound business judgment, after careful deliberation of its consequences and possible

alternatives.

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Therefore, NPPII respectfully prays that this Honorable Court grant the Debtor’s Motion

herein, and enter an Order validating the Debtor’s actions through and including the filing of this

Motion with regard to corporate authority to execute the Pre-Contract, and authorizing the Debtor,

in its capacity as sole equity interest holder in NPPOS, to further resolve and authorize NPPOS to

sell substantially all of its assets, and for such other and further relief as may be just and equitable

under the circumstances.

Date: May 6, 2013
























































































Respectfully submitted,

/s/ Jeffrey D. Goetz
Jeffrey D. Goetz, Esq., IS #9999366
Bradshaw Fowler Proctor & Fairgrave, P.C.
801 Grand Avenue, Suite 3700
Des Moines, IA 50309-8004
515/246-5817
515/246-5808 FAX
goetz.jeffrey@bradshawlaw.com

General Reorganization Counsel for
Natural Pork Production II, LLP,
Debtor and Debtor in Possession





CERTIFICATE OF SERVICE

This document was served electronically on parties who receive electronic notice through CM/ECF as



listed on CM/ECF’s notice of electronic filing.

/s/


LuAnn Gilbert





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