One of California's ‘largest almond growers’ goes bankrupt. It owes millions to local companies.

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GV Wire | 22 February 2024

One of California's ‘largest almond growers’ goes bankrupt. It owes millions to local companies.

by Edward Smith

A private equity farming giant with more than 1,500 acres of land in Fresno and Tulare counties and 8,600 acres statewide declared bankruptcy Monday.

Even with “extremely favorable water rights and competitive water costs,” Redwood City-based Trinitas Partners could not keep up with high borrowing costs and consistently low almond prices, according to bankruptcy filings.

The firm owes $190 million in secured and unsecured debt. The company filed for Chapter 11 bankruptcy in the Northern District of California.

The land has not yet hit the market, but Doug Phillips, president of Schuil Ag Real Estate, said it’s likely to come on soon. With the recent collapse of Prima Wawona, another investment firm, a lot of ag land is coming on the market at once.

But, with farmers across the board facing issues of higher operating costs and lower profits, the question of who will buy the thousands of acres coming online remains.

“It’s always sad to see another farming entity go down this path,” Phillips said. “I think it speaks to the tough situation that a lot of growers are in right now when it comes to low crop pricing, high farming costs, high interest rates, water uncertainty, and other factors out there.”

Almond Farming Investment Attracted Institutional Investment, Including UC System

Trinitas Partners began buying land in the Central Valley in 2015. It focused on land with superior water rights and young almonds, making the orchards more valuable for long-term growth, according to court filings.

The firm has holdings across California including:

  • 3,095 acres in Solano County

  • 3,218 acres in Contra Costa and San Joaquin counties

  • 1,543 acres in Fresno and Tulare counties

The firm also owns a 754-acre olive ranch, which isn’t part of the bankruptcy filing.

A third of Trinitas Partners’ holdings have riparian rights, giving them direct access to surface water. Even during severe drought, the firm had sufficient water for all of its orchards and obtained it at comparative bargain rates.

“Advantages in the Debtors’ cost-of-production, and the Debtors’ sustainability practices, the Debtors were well-positioned to become profitable ventures,” the court petition read.

Trinitas gathered largely institutional investors to form the investment fund TAAP IV. They spread the company out among 19 different LLCs. Investors included the University of California Regents and Makena Holdings, an investment company representing more than 50 endowment and foundation clients.

Water Availability Not Enough to Save Farming Giant From Low Almond Prices

Lowered almond prices caused significant drops in revenue. Since the pandemic, oversupply and difficulties exporting have led to collapsed almond prices. Court documents put the average price of almonds at $1.74 per pound. In recent years, almonds reached as high as $4 a pound.

What’s more, the firm’s investment strategy led them to younger orchards. The average age of their trees is under 5 years old, two years before being ready for full production. That meant lowered production numbers couldn’t fund operations.

With the need to fertilize and spray, maintaining the trees cost more than they were getting from them.

“Non-bearing acreage only takes expenses, right?” Phillips said. “It’s not generating income yet.”

In November 2022, the company received a $168 million loan from Rabo Agrifinance. While $130 million of that loan was on a fixed rate, the remaining $38 million was a floating rate. Rising interest rates increased the cost of that debt service.

After the Federal Reserve hiked interest rates, the cost to borrow followed. By Feb. 6, Rabo Agrifinance had declared the debt in default.

“As a result, the Debtors’ quarterly interest payment obligations have increased significantly in the 15 months since the Loan was made and are now TAAP IV’s largest expense category,” documents stated.

$27 Million of Unsecured Debt Owed

The firm still owes about $159 million to Rabo Agrifinance. Beyond that, the firm also owes $27 million to various companies. Bankruptcy documents outline 30 companies with the largest claims. Another document contains 107 pages of names of companies with outstanding claims to Trinitas.

Madera-based The Almond Co. has the largest claim with $9.2 million in trade debt.

Fresno-based The Harvesting Group has a $4.9 million debt claim.

Court documents state that the firm has “almost no cash during a critical period in the almond-growing season.”

Trinitas Bankruptcy Comes as Prima Wawona Puts Its Land on the Market

Stone fruit giant Prima Wawona declared bankruptcy in October 2023. While the company had few almond holdings — focusing more on peaches and nectarines — that means tens of thousands of acres are flooding the ag real estate market.

Prima Wawona is not related to Clovis-based Wawona Frozen Foods.

Prima Wawona has 16,000 acres being sold, and finding buyers will be a challenge.

“There’s a lot of land on the market currently and likely hitting the market soon,” Phillips said. “There’s only so many buyers out there, so there’s a good chance that will have an effect on land values with much more property on the market than there are available buyers.”

Over the past decade, institutional buyers like pension funds and insurance companies have been bullish on farm land. But that’s changed recently.

Phillips says he’s already seen purchasing from institutional investment buyers slowing down.

Phillips thinks most of the land coming on the market will be parceled out and sold to local growers. Many local growers are facing the same problem that Trinitas did, Phillips said. So it will come down to who has the money to buy.

“I could see it going out to local growers in the area,” Phillips said. “But again, they are also in the same position that Trinitas is in. It just puts everyone in a tough position.”

Trinitas’ Related Company Bought Major Hawaiian Ag Land

In 2019, one of Trinitas’ subsidiaries, Pomona Farming, purchased 41,000 acres of former sugarcane land under the name Mahi Pono and repurposed it for diversified ag use. The land cost $262 million, or roughly $6,400 an acre, according to the Maui Times.


Law 360 | 20 February 2024

By Clara Geoghegan · 2024-02-20 18:37:07 -0500 ·  Listen to article
An almond ranch operator in California and 18 of its affiliates have petitioned for Chapter 11 protection, laying out plans to use $30 million in debtor-in-possession financing to maintain operations while looking to shed some or all of its properties to pay off $188 million in debt.
In a series of first-day filings submitted Monday in California bankruptcy court, Trinitas Farming LLC, which was founded by a private equity firm, noted it expects 17 young almond orchards in Central California to turn a profit in the next few years. However, it added, the company filed for bankruptcy because low crop prices and high borrowing costs left it strapped for cash needed to keep the farms in business.
Trinitas Farming said it will sell off some or all of its operations starting in March and will use the proceeds to pay off $27 million in unsecured debt and $161 million owed to its secured lender, which will provide the DIP loan.
"The debtors' orchards are not yet old enough to generate mature production of almonds," Kirk Hoiberg, manager of Trinitas Partners LLC, a California investment firm that created the farming venture, wrote in a first-day declaration. "As a result, they will require an additional two or so years of farming and operations before they are able to generate mature almond production and corresponding revenue, leading to the need to fund operating losses as a part of the normal development cycle of young almond orchards."
Hoiberg said Trinitas Farming hasn't been able to line up a new source of funding while it waits for the trees to produce fruit.
The almond farm company was formed in 2015 out of an investment vehicle created by Trinitas Partners, according to Hoiberg's declaration. It has received $197 million in funding from investors who hold equity in it, the filing said.
Trinitas Farming operates 7,856 acres of almond trees at 17 ranches in California's Central Valley. The orchards are on average 4.7 years old and won't produce nuts for another one to two years, the debtor explained. Trinitas Farming is also the part owner of a nondebtor California olive farm, it added.
In November 2022, Trinitas Farming took out loans from Rabo Agrifinance LLC, an agricultural lending subsidiary of Rabobank Group, that included a $130 million term loan and up to $38 million available under a delayed draw loan with a floating interest rate, the bankruptcy filings showed.
While the term loan had a fixed interest rate, the $29 million Trinitas Farming borrowed under the delayed draw loan is subject to a floating interest rate that is re-calculated every month based on the Secured Overnight Financing Rate, or the SOFR, according to the declaration.
Hoiberg pointed out that since Trinitas Farming entered into the loan agreements, the SOFR, a daily estimate of borrowing costs calculated by the New York Federal Reserve, has almost doubled. He also said that quarterly interest payments to the lender are now Trinitas Farming's largest expense category.
On top of the increased interest rates, Trinitas Farming has been hurt by low almond prices in recent years, Hoiberg said. According to the declaration, almonds currently go for $1.74 per pound, a nearly 30% price drop from the 10-year historic average price of $2.50 per pound. While the debtor hasn't produced any almonds yet, Hoiberg elaborated that the company can't scale back its operations as it waits for the market to improve, since doing so would kill or harm the almond trees and undercut future production capabilities.
In May 2023, Rabo Agrifinance agreed to waive events of default after the borrower fell below an asset-to-debt ratio requirement of the loan, Hoiberg said. Trinitas Farming began looking for new sources of capital or potential buyers for some of its assets but wasn't able to find a new partner, according to the declaration. 
On Feb. 6, the lender issued a notice of default and ceased funding Trinitas Farming, after the borrower fell below the asset-to-debt requirement and an adverse material condition clause of the loan was triggered, Hoiberg told the court. The almond farmer currently owes $161 million to Rabo Agrifinance, he noted.
Rabo Agrifinance has agreed to provide up to $30 million in DIP financing while Trinitas Farming looks for a potential buyer for some or all of its almond ranches, the declaration said. According to the document, $6.5 million of the loan will become available upon interim court approval, and Trinitas Farming agreed to initiate a Chapter 11 sale process in March under the terms of the DIP.
On top of its secured debt, Trinitas Farming has around $27 million in general unsecured debt, mostly from unpaid operations expenses, Hoiberg added. The orchard operator's unsecured debt includes $7.6 million owed to fellow California almond farmer Pomona Farming under an operations agreement, case filings showed.
Counsel for Trinitas Farming did not respond to a request for comment Tuesday.
The debtor is represented by Jane Kim and Jeremy V. Richards of Keller Benvenutti Kim LLP.
The case is In re: Trinitas Farming LLC et al., case number 24-bk-50210, in the U.S. Bankruptcy Court for the Northern District of California.
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