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

Just weeks before a pork slaughterhouse's announced closure date, bankruptcy court documents filed by HyLife Foods Windom paint a picture of financial freefall since the early days of the 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 are set to lose their jobs, and other residents in the town of 5,000 are bracing for financial disruption to the city and schools.

The company's executives in Canada, Japan and Thailand are putting HyLife Windom through a complicated bankruptcy sale as they attempt to offload the debt-ridden operation. HyLife is seeking a stalking horse bidder — 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 were 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," said Larry Anderson, a Cottonwood County commissioner. "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 anticipating fewer students come next fall.

Windom faces funding gaps

City officials have begun making plans for the loss of the massive factory, which helps fund the sewer and ongoing housing projects, and brings students to the schools.

On Tuesday, the Windom City Council voted to approve a resolution requesting $18 million from the Legislature. The money would help finish a housing project, which was created in partnership with HyLife to provide housing for workers. Many plant employees are currently housed in a former hotel in Mankato and bused in for daily shifts.

Part of the $18 million would also reduce debt at a renovated wastewater treatment plant.

"We just totally re-did the whole wastewater treatment plant, which was millions of dollars," said Jenny Quade, a Windom City Council member. HyLife agreed to pay for a percentage of that upgrade, she said. "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, welcomed more students to Windom, hiring English-language specialists to help the immigrant population succeed academically. Now, Stevens said, school officials foresee up to an $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 leaving roles unfilled as teachers resign or retire. As the school year winds down, he said, uncertainty is gnawing at children whose parents may not have work.

School officials are working to help support those 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."

The financial freefall

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 of them immigrants from Central America, Southeast Asia 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 2020 "unfortunate timing." American slaughterhouses were battling outbreaks of COVID-19 among workers, and meat shortages were happening across the country, throwing off the supply-demand balance.

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, HyLife Windom owed money to a long list of domestic and international creditors, including $108 million to American ag financiers.

The documents also reveal a complicated ownership chain from North America to 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 Manitoba-based HyLife.

Until March, Minnesota businessman Glen Taylor held a 25% stake in the Windom plant. Taylor had previously reopened the plant, transitioning it from beef to a pork facility, in 2016. Taylor owns the Star Tribune in a separate 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 and financial swings. Successful pork processors ride the market waves.

It's unclear from the documents what ultimately doomed HyLife Windom while other processors flourished.

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

A key difference, said Minnesota Department of Agriculture Commissioner Thom Petersen, is scale. The JBS pork plant in Worthington processes more than 20,000 hogs a day with 2,000 employees while HyLife in Windom slaughtered only one-fourth that number of animals with half the employees.

That inefficiency coupled with unfavorable exchange rates on overseas exports, particularly to Japan, hampered the facility's profitability, he said.

"The plant's size has been really intriguing," said Petersen. "The plant's in good shape. But it isn't as automated as it could be."

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. When that failed, 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. But there has been no bidder.

Tensions at the plant

As the early June closure date approaches, the slaughterhouse continues to churn. Workers say their hours have been cut on both shifts, disappointing many visa-holders who came to this country 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 relays a company directive, threatening to terminate workers early and send visa-holders back to their home countries if they don't return to work.

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

In a response to the video, Stacey Ashley, a HyLife spokeswoman, said that 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.

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

"Currently, our entire team in Windom remains employed, including our H-2B employees," she said. H-2B employees are temporary workers with a nonimmigrant visa issued for a limited period of time.

In an April 28 court filing, HyLife attorneys proposed an auction on May 26 and closing on the plant's sale by June 2.