Dairy farmers who were contracted to supply Longslow Food Group fear they could lose almost a million pounds in unpaid milk cheques.
The 55 suppliers were owed 1.3m when the company closed its Mochdre factory in North Wales in mid-October, after the loss of a big contract with retailer Spar to Dairy Farmers of Britain.
The farmers were assured the debt, which averaged almost 24,000 apiece, would be paid in full through four monthly payments ending January 2006.
But, soon after receiving their first cheques, producers got a letter from Longslow stating that no second payment would be made.
Eldon Thomas, who milks 160 Holsteins at Gloddaeth Isa, near Llandudno, said: “We are still owed 18,000 for milk supplied in the second half of September and part of October.
“We are in the middle of expanding, putting up new buildings. It has been quite a strain. I’ve talked to my bank, and they have been very helpful. But the chances of getting any money look pretty slim.”
The letter did not make it clear whether the second payment had been delayed or cancelled. But Philip Crewe, Longslow managing director, admitted to Farmers Weekly that it, and the third and fourth payments, would not be forthcoming.
He said Begbies Traynor, a corporate recovery company, had advised Longslow to apply for a company voluntary agreement.
If successful, Mr Crewe added, the company would be able to trade as a local milk wholesaler, using profits to pay creditors, including farmers, over the next three years.
“As our credit rating goes up again, we should be able to create a business driving for profit.
We have a 10m-12m turnover business employing 80 people, having secured supplies from Cotswold Dairies and South Caernarvon.”
He said it would be in farmers’ best interests to vote for a CVA.
“That way they will get a proportion of their money – not pound for pound – but I can’t say how much, as the supervisors do the calculation.
If we don’t get a CVA, we will go into administration.
I don’t think farmers would get anything then – we have no assets to sell that are not tied up by the bank.”
He hoped the bank would approve the CVA application this week to permit a creditors’ meeting by the middle of December.
Paul Williams, the local NFU group secretary based at Llanwrst, said the union wanted all the farmers to act as a group to get the best representation at any such meeting.
“The situation is critical.
Longslow needs to be open with all members that are owed money so they can plan their businesses accordingly,” he added.