There is hope for Auction Block sale, but no buyers

Feb 20, 2018

Sign announcing Auction Block's closure on its front door.Credit Aaron Bolton, KBBI NewsEdit | Remove

With the halibut and the summer fishing seasons just around the corner, the immediate outlook for a large, closed down fish buyer and processor on the Homer Spit is grim. But there is hope the business may be sold and back in operation within in the year.

Auction Block closed its doors officially back in December. The business had entered into bankruptcy earlier that fall as part of a potential $2 million sale to California-based Southwind Seafoods, but several months later, that deal has not taken place.

The lawyer of the trustee in the case, Bill Artus, said that’s because the deal is no longer on the table.

“Southwind has advised that they do not intend to complete the purchase,” Artus said.

Artus didn’t directly say why Southwind backed out of the deal.

Some in the fishing community have expressed concern over Auction Block’s doors remaining closed going into this year’s season. Brad Faulkner, owner of another fish buying operating, Alaska Custom Seafoods, told the Homer City Council earlier this month that less competition between fish buyers on Homer’s dock will lower fish prices.

“The price won’t reflect open competition and that’s what we’ve always had on the Homer dock,” Faulkner said.

Faulkner blamed the failure of the sale on the city, which objected to a court motion filed in November to sell the business to Southwind.  The city leases the property to Harbor Leasing who in turn sub-leases the land to Auction Block. Combined, both owe about $250,000 to the city for back rent and other services.

“So, if you really threw out the baby with the bathwater on this one in order to do $100,000 on your unsecured bankruptcy and threw out a good buyer that was coming to town out with it, the fishermen are going to lose,” Faulkner added.

City Manager Katie Koester said the city became aware of the potential sale in early summer last year, and she said it worked with Auction Block to complete a sale before it entered bankruptcy, even extending it lines of credit on its debt.

Koester said city code requires any debt owed by Auction Block or Harbor Leasing to be paid before the lease can be transferred to other parties. She explained that’s why the city objected to the sale.

Koester also argues the city’s objection did not cause Southwind to back out of the sale.

“It’s our understanding from our attorney’s communication with the trustee, that about in mid-October, Southwind just stopped communicating with the trustee,” Koester said. “I don’t know what the reasons for that are, but I’m assuming they couldn’t find favorable terms from the much bigger picture of the about $2.5 million purchase.”

Artus said Southwind did stop communication last fall, but did not officially back out of the sale until last month. Artus said there are currently no potential buyers.

“There’s always hope, but there’s no pending offer or a party that’s expressed a serious interest at this point,” he said.

 

The judge in the case, Frederik Corbit, approved the sale of Auction Block last month, but ruled that the city will need to sign off on any potential deal and that a portion of the proceeds would need to go towards the debt on the property.

Koester would not say whether the city is willing to take a partial payment, but she notes that the city is eager for Auction Block to sell.

“We’ve seen a lot of activity on the spit this past year. We’ve seen the transfer of two other large fish processing plants in the last couple of years to larger companies,” Koester said. “So, I feel like there’s a lot of interest and there’s a lot of activity, and a piece of property like that won’t sit vacant for long.”

There is a timeline for the sale of the business. As part of Corbit’s order, any sale will need to happen before the end of the year.