'A26—Lancaster Farming, Saturday, April 10,1982
SYRACUSE, NY - Stanley A.
Korona, President of Eastern Milk
Producers Cooperative, recently
announced his organization has
completed a multi-million dollar
loan package for the purchase of
two highly efficient and modern
cheese manaufacturmg plants
located at Waverly and Hor
seheads, New York.
Korona said Eastern is paying
|24.4 million to purchase the plants
from Leprmo Foods Company, of
Denver, Colorado, and has
borrowed |l9 million from General
Electric Credit Corporation to
complete the 20-year transaction.
The financing and purchase of
the plants by Eastern is part of a
long-term milk supply
arrangement the cooperative has
with Leprmo, in which more than
650 million pounds of milk are
provided annually by Eastern to
manufacture Italian cheeses in the
southern tier of New York State.
The plants were biult in May of
1975 by Leprmo, following
Eastern’s agreement to supply the
milk. Purchase of the plants by the
cooperative, with a lease-back
agreement by Leprmo, culminates
the arrangement as it was en
visioned by both parties about four
years ago.
Eastern seals multimillion $ Leprino purchase
Eastern General Manager,
Michael Donovan said, “Owner
ship of the plants by our dairy
farmer members puts the
organization in an excellent
position for both financial growth
and membership growth in years
to come. We now own two excellent
cheese manufacturing facilities,
which will generate substantial
income over the next 20 years.”
“Eastern ownership of the plants
helps our members in a direct and
immediate way while helping to
balance overall supplies in the
Northeast”, Donovan said.
Eastern’s purchase was ac
complished with $2 million of
member equity already invested, a
|3.4 million dollar subordinated
loan from Leprmo, and $l9 million
borrowed from GECC, a credit
subsidiary of the General Electric
Corporation. Both plants, prior to
installation of a $2 million waste
pre-treatment facility at Waverly,
were MAI appraised at $25.6
million. Adding Waverly im
provements, the plants now are
worth approximately $27.6 million.
Eastern’s purchase of the plants
at this tune requires no additional
dues or equity investment from the
membership. Additionally, the
lease-back by Leprmo provides
sufficient revenue to cover both
physical and mterest obligations
each year of the twenty-year
agreement. For this reason
ownership is expected to have no
negative effect on Eastern’s
marketing costs, while sub
stantially improving the equity
position of the balance sheet.
President Korona describes the
financing package as one
providing “fast amortization” of
the loan. Early m the schedule
most of Eastern’s payments to
GECC accrue to principal, which
rapidly builds equity; later in the
period, Eastern will realize
several million dollars as mcome.
At the termination of the 20-year
period Eastern members will own
the facilities without capital in
debtedness.
Leprmo Foods, lessor of the
plants, 'is the nation’s largest
manufacturer of high quality
natural cheeses for use m major
fresh pizza and Italian food
markets. Pizza Hut, Godfather’s
Pizza, Kraft Foods, L.D.
Schreiber, and Burger Kmg are
among the firm’s major moz
zarella customers.
“It is important to remember,”
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says Donovan, “that Leprmo
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markets, which are largely
unaffected by the level of gover
nment purchases of surplus
cheese, butter and milk powder.
Markets for Eastern milk have an
opportunity for commercial
growth while government pur-
chases are being squeezed.”
Early in May the cooperative is
planting an “Open House Pizza
Party” for the members of
Eastern. It will be an opportunity
for farmers to visit and tour their
newly acquired facilities at
Waverly and Horseheads.
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