Pennfield Corp. has filed for bankruptcy reorganization and agreed to sell its operating assets to a startup firm, Wellsource Nutrition.

The Lancaster-based firm said Thursday the sale would include its feed mills in Mount Joy, Martinsburg and South Montrose.

Under the bankruptcy process, however, other parties will have the chance to bid on the Pennfield assets and top Wellsource's offer.

Pennfield, which did not reveal Wellsource's bid, said it believes the sale will be completed within 90 days.

In the meantime, said Pennfield, its operations will continue without interruption.

Pennfield customers will not see any change in service or quality, the firm said.

One of the county's top feed manufacturers, Pennfield is a regional provider of dairy, horse, poultry and specialty feeds.

The company has lost money in four of the past five years, including a $3.4 million net loss on sales of $210.8 million in 2011.

Its annual losses have exceeded $3 million for the past three years, according to its bankruptcy court filings.

Pennfield said it's been hurt by the loss of key customers, rising prices for feed ingredients and a shrinking dairy industry.

Arnold Sumner, hired in November as president and chief executive officer, said Pennfield was "excited and pleased" to join Wellsource.

In a prepared statement, Sumner noted Wellsource's "industry knowledge and financial strength."

Sumner could not immediately be reached for additional comment.

Wellsource also has agreed to loan Pennfield $2 million to fund its daily operations until the sale is finalized, bankruptcy court filings show.

Pennfield said it needs the loan because it doesn't have the cash on hand to continue.

Local and national feed industry officials were unfamiliar with Wellsource and its parent company, Carlisle Advisors.

State records show Carlisle Advisors was formed in March by Ralph W. Briggs, a Carlisle resident.

Briggs is chief operating officer of Novera Protein, based in Easton, Md., which makes proteins that are added to dairy feed.

Briggs could not immediately be reached for comment.

Tom Haschen, chairman and CEO of Novera Protein, said Novera Protein has no connection to Wellsource.

Pennfield, in a press release announcing the bankruptcy and sale, implied Wellsource is a startup firm.

According to the press release, "Wellsource Nutrition is acquiring and building feed and agronomy assets ...

"(It) will be a fully integrated agricultural business with grain handling, mineral and pre-mix manufacturing, feed manufacturing and agronomy production arms ..."

Pennfield did not say where Wellsource is getting the funds to buy the assets.

Wellsource's offer culminated a process that started in July, when Pennfield decided to seek buyers for some or all of its mills.

Pennfield hired an advisor that contacted 23 potential suitors. Nine showed serious interest.

Two potential buyers, including Wellsource, made offers for the entire business while four made offers for portions of it.

Assets excluded from the Wellsource deal would be a 165-acre farm in York County and the 3.1-acre former headquarters in Rohrerstown.

Pennfield intends to sell them in a separate process.

The mills, the land and other assets of Pennfield are worth about $17 million, the company estimated.

On the other side of the ledger, the 2260 Erin Court company estimated it has between 200 and 999 creditors.

Among the creditors who are unsecured, the largest is Bryn Mawr Trust Co., which Pennfield owes $7.7 million.

Most of the other big unsecured creditors are suppliers of feed ingredients, which are owed as much as $1.2 million.

The primary secured creditor is Fulton Bank, which is owed a combined $10 million on several loans.

Pennfield is a 93-year-old company owned by the Horn family, led by Sumner's predecessor as CEO, Ernest O. "Mike" Horn III.

Over the past 20 years, the company has changed dramatically.

It once had more than 800 employees, with feed, egg, chicken-processing, pork processing, seed and other divisions.

This spring, Pennfield began a further restructuring by selling its Hempfield Road poultry-feed mill to Wenger's Feed Mill.

At the same time, Pennfield cut payroll at its remaining sites from 130 employees to 112.

To guide it through the bankruptcy process, Pennfield has hired the Maschmeyer Karalis law firm.

Pennfield has paid the Philadelphia law firm a retainer of $188,000, according to bankruptcy court filings.

As part of the bankruptcy process, Pennfield is asking the U.S. Bankruptcy Court's permission to add several advisers and keep operations as usual.

Among the requests is one to keep Sumner on the job but roll back his salary to $6,731 every two weeks (or $175,000 a year).

He'd also get a $15,000 signing bonus, a company car, a company-paid furnished apartment here and company-paid travel to his St. Louis-area home each week.

Keeping Sumner at the helm would provide "stability and leadership at this critical time," the company said.

Sumner's pay had been doubled to $13,462 every two weeks ($350,000 a year), effective Sept. 1.

Pennfield dates to 1919, when brothers David and Ernest Horn went into the feed business with $500 cash, a $2,000 loan and a horse-drawn wagon.

Within two years, they were able to buy a Model T pickup to make sales calls and deliveries.

In 1935 they built their first complete feed manufacturing plant in York.

What became D.E. Horn & Co. merged with Rohrerstown-based Miller & Bushong in 1971.

The combination was called Pennfield, with its headquarters in Lancaster County.

The old Miller & Bushong feed mill on Rohrerstown Road, a local landmark, was closed in 1977 and razed in 2005.
tmekeel@lnpnews.com