In re Humboldt Creamery, LLC

2009 WL 2820610 (2009)

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In re Humboldt Creamery, LLC

United States Bankruptcy Court for the Northern District of California
2009 WL 2820610 (2009)

Facts

Dairy company Humboldt Creamery, LLC (Humboldt) (debtor) filed a chapter 11 bankruptcy petition in April 2009. In July 2009, the bankruptcy court approved bid and sale procedures for the sale of Humboldt’s creamery operations, which constituted substantially all of Humboldt’s assets. Foster Farms Dairy (Foster Farms) was the stalking-horse buyer (i.e., the prospective buyer that set the opening bid). Foster Farms bid $20.5 million and would either receive the creamery assets at that price or be paid a $300,000 breakup fee. Despite full marketing efforts, Foster Farms ultimately was the only bidder. Humboldt asked the court to approve the sale to Foster Farms outside the process of confirming a proposed reorganization plan. Humboldt asserted that if the sale were not approved, Humboldt would not have funds to continue operating after September 4, 2009. However, the court knew that if the sale were approved, there would be little to distribute to Humboldt’s unsecured creditors given the amount of Humboldt’s secured debt. Nevertheless, none of Humboldt’s creditors objected to the sale.

Rule of Law

Issue

Holding and Reasoning (Jaroslovsky, J.)

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