BATON ROUGE, La. (AP) — Agriculture Commissioner Mike Strain proposed to borrow $7 million to take ownership of a failed sugar cane mill in southwest Louisiana built with state dollars and now teetering on default of its debt payments.
If the mill defaults on its debt, the bank would take over the property. Strain instead wants to sell bonds that will be used to pay the bank loan, so the state could own the mill and be able to sell it or lease it to recoup some of its investment.
"We will consider all offers to maximize the return to taxpayers and minimize the loss," Strain told the Legislature's joint budget committee Friday.
Strain said the state agriculture department spent $80 million to build and maintain the Lacassine mill under his predecessor, Bob Odom. Strain said it was appraised recently for $6.4 million.
The $7 million in borrowing would be done through the Louisiana Agricultural Finance Authority. The joint budget committee agreed without objection to the proposal Friday. Strain also needs the backing of the State Bond Commission before he can refinance the debt as proposed.
The mill in Jefferson Davis Parish, completed in 2006, has been a financial failure. Built for a group of cane farmers, the mill overshot its budget, never yielded the profit Odom projected and has been idle for several years.
"Someone running that as a cane facility is limited," Strain said, explaining that there aren't enough sugar cane farms in the area.
The Agriculture Department sold the mill the year it was completed to Lake Charles Cane-Lacasinne Mill LLC in an all-financed deal with no cash changing hands. The state still is paying off the construction debt.
Lake Charles Cane is controlled by a Colombian company, Cementos Andinos SA, which also agreed to build an ethanol plant at the site. That plant has not been built, and Lake Charles Cane was officially put in default by the LAFA earlier this year after missing its loan payment to Merrill Lynch, which has a mortgage on the mill as collateral for the loan.
Strain wants to borrow the money to pay off the Merrill Lynch debt and regain control of the mill.
Lawmakers said Strain's plan — developed in talks with the legislative auditor, Gov. Bobby Jindal's administration and others — was the best way to deal with the problem the agriculture commissioner inherited from his predecessor.
"I believe that what he brings to the table is a reasonable way for us to get out of this situation," said Rep. Dan "Blade" Morrish, R-Jennings, who lives in the area where the mill is located.
Strain said while he's not sure anyone would be interested in buying it to use as a sugar cane mill, investors might be interested in its value as an industrial facility located on a rail line.