GVM, Inc. v. Peoplesbank (In re GVM, Inc.)
| Decision Date | 06 September 2019 |
| Docket Number | Case No. 1:19-bk-03015-HWV,Case No. 1:19-bk-03013-HWV,Jointly Administered with Case No. 1:19-bk-03014-HWV |
| Citation | 605 B.R. 315 |
| Parties | IN RE: GVM, INC., et al., Debtor. GVM, Inc. and Independent AG Equipment, Inc., v. PeoplesBank, A Codorus Valley Company, Respondent |
| Court | U.S. Bankruptcy Court — Middle District of Pennsylvania |
Albert A. Ciardi, III, Ciardi Ciardi & Astin, P.C., Philadelphia, PA, for Debtor.
Motion for Use of Cash Collateral 11 U.S.C. § 363
Henry W. Van Eck, Bankruptcy Judge This matter came before the Court for hearing on August 8, 2019 (the "Hearing") regarding the Emergency Motion of GVM, Inc. ("GVM") and Independent AG Equipment, Inc. ("IAE") for an Order Pursuant to 11 U.S.C. § 363 To: (I) Permit Use of Cash Collateral and Provide Adequate Protection to Parties with Interest in Cash Collateral, (II) Request for Expedited Hearing, Reduced Notice Period and Limited Notice Pursuant to Federal Rule of Bankruptcy Procedure 9006(C)(1) and M.D. Pa. L.B.R. 9075-1(A) and (III) For Related Relief (the "Motion"), and the Objections filed thereto by PeoplesBank, a Codorus Valley Company (the "Bank") and Moneycorp US, Inc. ("Moneycorp") in the above-referenced bankruptcy cases. In the Motion, GVM and IAE (collectively, the "Debtors") seek entry of an order authorizing them to use cash collateral during the pendency of these cases to avoid immediate and irreparable harm to the estates and to continue their business operations with the objective of formulating effective plans of reorganization.
The Court has jurisdiction over this matter pursuant to 28 U.S.C. §§ 157 and 1334. This is a core proceeding pursuant to 28 U.S.C. § 157(b). Venue is proper in this Court pursuant to 28 U.S.C. §§ 1408 and 1409.
GVM is a family-owned business operating as a manufacturer and distributor of agricultural equipment and supplies throughout the eastern United States. GVM primarily manufactures heavy agricultural equipment used for spreading and spraying liquid or dry fertilizers and pesticides. It also manufactures equipment used for applying anti-icing treatment to roads, which makes use of technology similar to its agricultural spreaders and sprayers. IAE is a distributor and servicer of new and used agricultural equipment and accessories. GVM sells its products through IAE and also through third-party distributors. IAE sells products manufactured by both GVM and by third-party original equipment manufacturers. The Debtors each filed a voluntary petition for reorganization under chapter 11 of Title 11, U.S.C. § 101 et seq. (the "Code") on July 13, 2019 (the "Petition Date"). By Order of this court entered on August 13, 2019, these cases are being jointly administered for the convenience of the parties.
The Bank has three outstanding loans to GVM (the "GVM Loans") and one outstanding loan to IAE.
The GVM Loans consist of a line of credit that revolved until the Chapter 11 filings (the "GVM LOC"), a term loan (the "GVM Term Loan"), and a term-out loan (the "GVM TO Loan"). Bank's Statement in Supp. of Objs. 2–3, ECF No. 120 ("Bank Closing Statement"); Bank Exs. 15, 21, 27, 30, 32, 33. Each of these loans to GVM were made pursuant to an Amended and Restated Loan and Security Agreement made as of August 6, 2018, as amended over time (the "GVM Loan Agreement"). Bank Exs. 15, 27, 30, 32, 33. According to the testimony of the Bank's Chief Credit Officer, Dennis Ginder, the balance outstanding on the GVM LOC as of August 8, 2019 was $3,147,810.64. Hr'g Tr. 209:1. Mr. Ginder also testified that the balances outstanding on the GVM Term Loan and the GVM TO Loan as of August 8, 2019 were $311,624.27 and $333,262.60, respectively. Hr'g Tr. 209:6; 210:23. The total amount owed by GVM to the Bank in connection with the GVM Loans is therefore $3,792,697.51. GVM unconditionally guaranteed all of IAE's obligations to the Bank. Bank Exs. 2, 3.
The Bank has one outstanding loan to IAE, which was also a revolving line of credit until the Chapter 11 filings (the "IAE LOC"). Bank Closing Statement 2; Bank Exs. 1, 5, 7, 11, 13. The IAE LOC was made pursuant to an Amended and Restated Loan and Security Agreement made as of August 6, 2018, as amended over time (the "IAE Loan Agreement"). Bank Exs. 5, 7, 11, 13. The balance outstanding on the IAE LOC as of August 8, 2019, according to the testimony of Mr. Ginder, was $8,221,293.99, exclusive of fees and expenses. Hr'g Tr. 211:3. IAE unconditionally guaranteed all of GVM's obligations to the Bank. Bank Exs. 19, 20.
Based upon the evidence of record, GVM and IAE collectively owe the Bank $12,013,991.50 in connection with the GVM Loans and the IAE LOC.
All obligations of GVM and IAE to the Bank, either as borrower or guarantor, are secured by security interests in substantially all of the Debtors' assets including, among other things, accounts receivable, inventory consisting of wholegoods inventory and parts inventory, equipment, general intangibles, and proceeds (collectively, the "Article 9 Collateral"), to secure all of their obligations to the Bank, both direct and indirect.1 Bank Closing Statement 3; see Bank Ex. 1, §§ 1.14, 1.57, 3.1, 3.2. The Bank perfected its security interests against the Article 9 Collateral in connection with the IAE LOC on August 21, 2012 by filing financing statements with the Pennsylvania Secretary of State, which were renewed by UCC filing dated July 11, 2017. Bank Exs. 38, 39. The Bank also perfected its security interests against the Article 9 Collateral in connection with the GVM Loans on August 21, 2012 by filing financing statements with the Pennsylvania Secretary of State, which were renewed by UCC filing dated June 14, 2017. Bank Exs. 40, 41.
The obligations of GVM and IAE to the Bank are also secured by mortgages on real property owned by an affiliate, GVM West, Ltd. ("West"), which has filed its own Chapter 11 petition, and real property owned by other affiliates, Anderson Real Estate, LLC ("ARELLC"), Mark Anderson and Tracy Anderson (the "Andersons" and collectively with ARELLC, the "Affiliates"), who have not sought relief under the Bankruptcy Code to date. See Bank Closing Statement 5; Bank Ex. 1, § 1.61; Bank Ex 15, § 1.63. The real property owned by West is hereinafter referred to as the "West Real Property" and all real property owned by the Affiliates is hereinafter collectively referred to as the "Affiliates Real Property."
In addition to the foregoing, GVM also pledged to the Bank 10,350,079 shares of stock in AgJunction, Inc. ("AgJunction"), and any shares of stock in AgJunction GVM subsequently acquires, as security for the GVM Loans and its guaranty of the IAE LOC (the "Pledged Shares"). Bank Ex. 22. The Pledged Shares included 2,723,705 shares of AgJunction stock pledged by GVM to Jack Anderson (the "Anderson Pledge"). See Bank Closing Statement 5; Bank Ex. 22, § 1.11. The Bank subordinated its position regarding the Anderson Pledge to Jack Anderson in a Subordination and Intercreditor Agreement made as of September 23, 2015. Bank Ex. 23. The Article 9 Collateral, West Real Property, Affiliates Real Property, and the Pledged Shares are hereinafter referred to collectively as the "Collateral."
According to the Bank, GVM had accounts receivable totaling $258,825.162 (the "GVM Accounts Receivable") and inventory3 valued at $7,844,225.924 (the "GVM Inventory" and collectively with the GVM Accounts Receivable, the "GVM Cash Collateral") as of August 8, 2019. See Bank Closing Statement 6; Debtors Ex. 1. The Bank calculated the book value of GVM's equipment, as of May 31, 2019, to be $246,902.00 (the "GVM Equipment"), net of the amount estimated by the Bank to pay off claims secured by liens against the GVM Equipment that may be senior in priority to the Bank.5 See Bank Closing Statement 6. The Debtors valued the Pledged Shares at approximately $4 million. Hr'g Tr. 34:17–23. According to the Bank, however, and based in part upon information from a financial statement internally prepared by GVM, the value of the Pledged Shares net the Anderson Pledge is only $2,948,000.00. Bank Closing Statement 8. The aggregate net value of the GVM Cash Collateral, the GVM Equipment, and the Pledged Shares is therefore $11,297,953.08.
According to the Bank, IAE had accounts receivable totaling $1,599,016.756 (the "IAE Accounts Receivable") and inventory7 valued at $10,837,787.308 (the "IAE Inventory" and collectively with the IAE Accounts Receivable, the "IAE Cash Collateral") as of August 5, 2019. See Bank Closing Statement 7; Debtors Ex. 1. The Bank calculated the book value of IAE's equipment, as of May 31, 2019, to be $347,395.02 (the "IAE Equipment"), net of the amount estimated by the Bank to pay off claims secured by liens against the IAE Equipment that may be senior in priority to the Bank. See Bank Closing Statement 7. The combined net value of the IAE Cash Collateral and the IAE Equipment is therefore $12,784,199.07.
Testimony was provided by the Debtors' President and Owner, Mark Anderson, indicating that the value of the West Real Property, against which the Bank holds a first priority mortgage, is approximately $1,000,000.00.9 The Bank did not dispute this value. No evidence regarding the value of the Affiliates Real Property was offered at the Hearing.
The GVM Cash Collateral and the IAE Cash Collateral may hereinafter be collectively referred to as the "Cash Collateral." The Cash Collateral, the GVM Equipment, the IAE Equipment, the Pledged Shares, the West Real Property and the Affiliates Real Property may hereinafter be referred to as the "Collateral."
It is undisputed that, except as noted above, the Bank has a first priority perfected lien against the Collateral, including the Cash Collateral....
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