rabble blogs are the personal pages of some of Canada's most insightful progressive activists and commentators. All opinions belong to the writer; however, writers are expected to adhere to our guidelines. We welcome new bloggers -- contact us for details.

Despite plans to reopen next week, ripples from XL Foods closing may spread

Please chip in to support rabble's election 2019 coverage. Support rabble.ca today for as little as $1 per month!

With reports yesterday the XL Foods meatpacking plant in Brooks is likely to reopen in a week, media attention is bound to shift back to the schedule on which full production will resume under whatever management team now gets to run the slaughterhouse.

But potential fallout from the E. coli crisis at XL Foods and the surprise sale of the company to a giant Brazilian meatpacking corporation could turn out to be more severe for farmers, workers and the provincial economy than just a month-long shutdown of beef processing at Canada's second-largest meatpacker would suggest, and problems won't necessarily be avoided by the plant's acquisition by a new owner.

If Nilsson Brothers Inc., the privately owned corporate parent of XL Foods, continues to be heavily invested in agricultural land, ranching operations, feedlots and auction houses, and if it also remains financially on the hook for the disaster in Brooks, serious implications could spread far and wide through the rural Alberta economy.

The problem is, we can't really know because as privately owned companies, XL Foods and Nilsson Brothers are able to make decisions in almost total secrecy based on knowledge only available to a small circle of insiders -- even though both provincial and federal taxpayers have been putting money into their operations.

Many Alberta stakeholders -- including most of our politicians, in all likelihood -- are just passengers on this ocean liner and those white things we see in the mist may or may not be icebergs. Meanwhile, we are advised only to not be alarmed and to cook our beef thoroughly.

The announcement last week by the U.S. subsidiary of JBS SA of Sao Paulo, Brazil, that its managers were immediately taking over running the problem-plagued XL Foods plant in Brooks and that it had an option to purchase the facility for $100 million US half in cash and half in shares, raises significant questions to which Albertans deserve answers.

Did Nilsson Brothers clear their unexpected plan to sell off the Brooks packing plant to JBS USA with the people and businesses to whom they owe financial obligations?

As has been said in this space before, it seems highly improbable Nilsson Brothers made its multi-million-dollar investments in XL Foods without silent business partners to backstop the deal. If the Nilssons did not clear their plan with their creditors and if they have not cut the links between XL and their other holdings, it is hard to imagine how their company can survive.

If it doesn't, what happens to its other operations?

In other words, this could have a much bigger impact on the Alberta cattle trade than the actual packinghouse problems in Brooks because the Nilssons are so horizontally extended into feedlots, ranches, auction services and cattle financing from their modest headquarters on St. Albert Trail in Edmonton.

JBS, as readers will recall, stated unequivocally in its news release announcing the manage-to-purchase scheme that there is no way it will be responsible for any of XL Foods liabilities, debts or penalties.

Moreover, how to we explain the 25-per-cent interest rate given to XL Foods by HSBC Bank Canada and reported by the Edmonton Journal in a good story on this situation published on Oct. 18?

To buy the Brooks plant, according to the Journal, "a consortium of lenders headed by HSBC Bank Canada gave XL Foods a $225-million line of credit at an interest rate of 25 per cent. In addition, the Nilsson brothers used their 75,000-head feedlot operation and other lands near Brooks as collateral on an $18-million mortgage from Metropolitan Life Insurance Co. and a $20-million loan from the Bank of Nova Scotia, the latter at a rate of prime plus 10 percentage points."

On its face, the high interest rate suggests the bank believes the company's position was shaky from the get-go. If that is so, we have to assume the bankers' consortium protected itself from circumstances like those that have now unfolded. Will the lenders try to take over these assets? You have to admit, this would hardly be atypical behaviour for bankers. If so, what will they do with them? What will happen to unsecured creditors?

Count on it that JBS is already negotiating with XL Foods' secured creditors to find out how little the Brazilian company can pay for its new Alberta assets. That means that many of the numbers that have been reported may not turn out to be anything at all like the final details of the deal, and that deal may not be very favourable to the Nilssons.

Well, you may say, this is just a problem for a bunch of businessmen, boring members of the 1 per cent. But not really. Albertans and other Canadians have a stake in XL Foods in the sense both federal and provincial taxpayers have been putting grant money into its operations.

While the Nilssons were using our money to improve their massive facility in Brooks -- the one that now appears likely to end up in Brazilian hands -- they were closing two plants in Calgary, another in Moose Jaw and yet another in the United States.

No doubt taxpayers will have to pay for the fallout from those closings too, at least the ones in Canada.

Nothing unusual about this, of course. There has been a parade over the years of fast guns in the Alberta meat-packing industry, helped out by taxpayers and sadly unsuccessful in a difficult business. Who can forget what Peter Pocklington was doing when he wasn't making Edmonton hockey fans unhappy?

When they mess up, as businesses do with regularity, taxpayers often get to pick up the pieces.

So the most important question, it would seem to me, is this: What are we getting for our investment?

This post also appears on David Climenhaga's blog, Alberta Diary.

Thank you for reading this story…

More people are reading rabble.ca than ever and unlike many news organizations, we have never put up a paywall – at rabble we’ve always believed in making our reporting and analysis free to all, while striving to make it sustainable as well. Media isn’t free to produce. rabble’s total budget is likely less than what big corporate media spend on photocopying (we kid you not!) and we do not have any major foundation, sponsor or angel investor. Our main supporters are people and organizations -- like you. This is why we need your help. You are what keep us sustainable.

rabble.ca has staked its existence on you. We live or die on community support -- your support! We get hundreds of thousands of visitors and we believe in them. We believe in you. We believe people will put in what they can for the greater good. We call that sustainable.

So what is the easy answer for us? Depend on a community of visitors who care passionately about media that amplifies the voices of people struggling for change and justice. It really is that simple. When the people who visit rabble care enough to contribute a bit then it works for everyone.

And so we’re asking you if you could make a donation, right now, to help us carry forward on our mission. Make a donation today.

Comments

We welcome your comments! rabble.ca embraces a pro-human rights, pro-feminist, anti-racist, queer-positive, anti-imperialist and pro-labour stance, and encourages discussions which develop progressive thought. Our full comment policy can be found here. Learn more about Disqus on rabble.ca and your privacy here. Please keep in mind:

Do

  • Tell the truth and avoid rumours.
  • Add context and background.
  • Report typos and logical fallacies.
  • Be respectful.
  • Respect copyright - link to articles.
  • Stay focused. Bring in-depth commentary to our discussion forum, babble.

Don't

  • Use oppressive/offensive language.
  • Libel or defame.
  • Bully or troll.
  • Post spam.
  • Engage trolls. Flag suspect activity instead.