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Records: Yarnells in straits since 01

MICHAEL LIPKIN
ARKANSAS DEMOCRAT-GAZETTE

Yarnells Ice Cream Co., which borrowed $7 million from state agencies before it stopped operations last Thursday, was in dire financial straits several times in the past decade, according to documents provided by Arkansas Development Finance Authority. The documents show

Searcy-based Yarnells which says it is currently soliciting offers to buy the company was put up for sale in late 2001, and asked the authority for temporary relief from payments on its $2.6 million loan. Gene Eagle, the authoritys vice president of development finance, wrote in a Dec. 27, 2001, memo to the agencys board that the com-

pany is being confidentially marketed for sale. The memo was a summary of the reasons behind Yarnells request for a sixmonth payment forbearance. Net worth turned negative at the end of November, Eagle wrote, adding that cash on hand was extremely thin. Then-President A. Rogers Yarnell II quickly withdrew the request, because the for-

bearance would count as a technical default, according to a letter from authority loan officer Chuck Cathey to the agencys board the next month. Yarnells stockholder equity also fell below $4.3 million in 2002, according to a June 21, 2002, letter from the company to Eagle, which violated the loan agreement. Yarnell asked the authority

for an exemption from the requirement. These documents accompanied more-detailed reports from Yarnells describing the companys plans to solve its situation, but the authority withheld those reports Thursday because, the agency said, they would give advantage to competitors or bidders, an exception to the Arkansas
See YARNELLS, Page 6D

e l r v Continued from Page 1D e Freedom of Information Act. Although operations have e ceased, efforts to market the s company are ongoing and sevs eral entities have expressed ins terest in acquiring and operatr ing the facility in Searcy, Eagle said in an e-mail. Needless to - say, due to the extremely sens sitive nature of these negotiae tions, the authority could not o provide the documents. n A Yarnells spokesman cond firmed Eagles statement but - declined to comment further. . Yarnells currently owes l about $3.52 million on its a outstanding loans, largely the a result of bonds issued by the n city of Searcy to the company. Yarnells defaulted on a prins cipal and interest payment of - $77,065.86 due July 1, the day d after it stopped producing ice s cream. 150 workers lost their jobs at the Searcy plant, along with another 50 employees n elsewhere. The family-owned s business was started in 1932. Eagle said the authority f - made the payments for Yar- nells last week, because as o the bonds guarantor it was s legally obligated to do so. , They didnt have the cash, 2 Eagle said. If they dont have , it, we have to pay it. Its anoth- er thing thats added to what o they owe us. That payment came from e s an insurance fund seeded by companies that borrow from r the authority, Eagle said, and - was not state money. The fund e has about $18 million. Yarnells loans date to 1994 f - when the city of Searcy issued - $4.6 million in bonds to the d company. Two million dollars 9 was guaranteed by the Arkank sas Economic Development a Commission, the rest by First - Commercial Bank, which was bought by Regions Financial

Yarnells

Corp. in 1998. Regions decided not to renew its obligation in 2000, prompting the authority to step in. A balloon payment was due in 2006 on the 1994 loan, which the authority expected Yarnells could not afford, so the agency refinanced it to give the company more time, Eagle said. Yarnells now owes the authority $1.96 million and the commission about $100,000 on the 1994 loan. The commission also lent Yarnells $1.5 million in mid2001 as part of a community block development grant. The commission said Thursday that Yarnells is behind on its payments, and still owes $1.45 million. The White County assessor values Yarnells land, equipment and vehicles at $2.2 million, more than $1 million less than the companys combined public debt.