Windom plant was losing $6M every month, bankruptcy files reveal

Just weeks before a pork slaughterhouse's announced closure date, bankruptcy court documents filed by HyLife Foods Windom paint a dire picture of its financial freefall since the early days of the COVID-19 pandemic.

An affidavit from a HyLife executive filed in federal bankruptcy court in Delaware last month revealed HyLife Windom was, on average, losing $6 million to $7 million a month since the Canadian company took over the plant in May 2020.

Now, more than 1,000 employees stand ready to lose their jobs and other residents in the town of 5,000 brace for financial disruption to the city and school.

The company's executives in Canada, Japan and Thailand are running HyLife Windom through a complicated bankruptcy sale and is attempting to sell the debt-ridden operation. HyLife is seeking a stalking horse bidder — which is an outside firm that agrees to place the first bid on distressed assets, setting the bidding floor.

Until very recently, the plant and its large workforce had been an economic driver for the town.

"I would say they've brought a lot of people into the area and a lot of people into town," Larry Anderson, a Cottonwood County Commissioner, said. "I would call them a good neighbor."

With just two weeks to go until the planned closure, anxiety is heightened in Windom and its school district, where administrators are eying a substantial hole in the student body come next fall.

At its height, the 226,737-square foot factory — a midsized pork plant — slaughtered 5,600 pigs a day and employed hundreds of workers, many immigrants from Central America, southeast Asian and Africa. According to the company's own court filings, HyLife Windom sold 325 million pounds of pork in 2022, generating $370 million in sales.

In an affidavit, HyLife CEO Grant Lazaruk called the purchase of the Windom plant in May of 2020 — when American slaughterhouses battled outbreaks of COVID-19 cases among workers, and as meat shortages fueled consumer demand across the country — "unfortunate timing."

The pandemic "greatly impacted the processing and production of pork across the United States, with effects resonating throughout the pork supply chain," Lazaruk said, in an affidavit dated April 27.

As of late April, according to bankruptcy documents, HyLife Windom owed money to a longlist of domestic and international creditors, including $108 million to American ag financiers.

The documents also reveal a complicated ownership chain touching North American and Asia. Manitoba-based HyLife, a leading Canadian pork producer, owns the plant in Windom, as well as two subsidiaries involved in the bankruptcy proceedings: Tritek and Canwin Farms, a South Dakota hog company.

Two other companies — a Canadian affiliate of Thailand-based food giant Charoen Pokphand Foods and the Japanese trading company Itochu Corporation — each split ownership of HyLife.

Until March, Minnesota businessman Glen Taylor had a 25% stake in the Windom plant. Taylor had previously reopened the plant, transitioning it from a former beef plant to a pork one, in 2016. Taylor also owns the Star Tribune in a separate business venture.

A representative for Taylor said he was traveling Friday and unable to respond to a request for comment.

Pork is a commodity and, like other raw agricultural goods, is prone to volatile market forces that produce dramatic financial swings. Successful pork processors ride the market waves.

It's unclear from the documents what ultimately doomed HyLife Windom — a company whose pork products traveled from the southwest Minnesota plant to consumers' plates around the globe in three weeks — while other processors flourished.

Last December, for example, Austin, Minn.-based Hormel Foods posted a 9% yearly increase on earnings, reporting $12.5 billion. A year earlier, Chinese WH Group, which owns hog giant Smithfield, grew the company nearly 7% to $27 billion.

But by last summer, HyLife wanted out of Windom.

The company hired London-based PricewaterhouseCoopers in August to find a buyer for the Windom plant, according to bankruptcy documents. After failing to produce suitors, the company hired Intrepid Investment Bankers, of Los Angeles, in late February to prepare for bankruptcy.

According to Lazaruk's affidavit, the company has heard from 115 interested parties, made one management presentation and hosted two site visits. Still, the company has no bidder yet.

Tensions at the plant

In Windom, the slaughterhouse continues to churn as the early June closure date approaches. According to workers, their hours have been cut on both shifts, frustrating employees and falling short of expectations for many visa-holders who'd come to the U.S. based on the promise of a contract and high wages.

A video shared with the Star Tribune, and confirmed by the company, highlights growing frustration among the plant workers over the company's closure plans.

In the video, workers appear visibly anxious and angry when a coworker threatens to terminate them early and send visa-holders back to their home countries.

"They're going to fire us," one worker is heard to say.

In a response to the video, Stacey Ashley, a HyLife spokeswoman, said after a recent informational meeting, employees refused to start their shift.

"Understanding the heaviness of the current reality, we gave the group a moment in the cafeteria to reflect and then asked employees on three separate occasions if they would please begin work," Ashley said.

During the exchange, Ashley said, the company communicated to the workers they would be out of a job if they refused to work.

"Currently, our entire team in Windom remains employed, including our H-2B employees," she said.

City officials in Windom are hoping for a new buyer but planning for the absence of the massive factory, which helps fund the sewer and ongoing housing projects, and brings in students of the workers to the schools.

Windom faces funding gaps

On Tuesday, the Windom City Council voted to approve a resolution requesting $18 million from the Minnesota legislature. Funds would shore up $10.5 million to finish a housing project created in partnership with HyLife that would provide local housing for workers, many of whom are currently housed in a former hotel in Mankato and bused in for daily shifts. Additionally, part of the $18 million would reduce debt at a renovated wastewater treatment plant.

"We just totally re-did the whole wastewater treatment plant, which was millions of dollars," Jenny Quade, a Windom city councilmember, said. Quade said HyLife had agreed to pay for a percentage of that upgrade. "What do we do? Pass all that debt onto the citizens of Windom?"

Local officials also asked the state to send $1 million to the local school system.

Dustin Stevens, school board chair for Windom Area Schools said officials estimate about 100 of the district's 1,000 students are children of HyLife workers.

"Approximately half of those students could be leaving," Stevens said.

The departure would deliver a blow to a rural district that, in recent years, had welcomed more students to Windom, hiring English-language specialists to help the immigrant population succeed in school. Now, Stevens said school officials eye as much as a $860,000 hole in a $15 million budget.

Stevens anticipated "absorbing" more than $200,000 in staff positions, including an English language learning specialist, by — or leaving roles unfilled as teachers resign or retire. As the school year winds down, he said, uncertainty continues to gnaw at children whose parents may not have work.

School officials are working to provide support for these children, he said, but it's been "difficult" to get much information from HyLife.

"From what we're understanding," Stevens said, "[visa-holders] have 10 days from their termination of employment to return to their home country."