US Tobacco Cooperative files for bankruptcy

USTC processes US flue-cured tobacco grown by its member-growers in Florida, Georgia, South Carolina, North Carolina, and Virginia

The largest tobacco co-operative in the US has filed for bankruptcy after a court ruling awarded damages to its members.

In a statement, the US Tobacco Cooperative Inc (USTC) said it filed for Chapter 11 protection in Federal Court in order to meet short-term contractual obligations to member-growers during crop season 2021. The co-op listed assets and liabilities of US$500m each in its bankruptcy petition.

The filing, on 7 July, comes as a court ruling in North Carolina awarded damages to its members due to the co-operative’s failure to distribute certain assets after the 2004 Fair and Equitable Tobacco Reform Act ended all aspects of the federal tobacco marketing quota and price support loan programmes.

The members claimed that since USTC’s purpose was administering the Tobacco Price Support Program, the programme’s end meant the co-operative should have ended with enactment of the 2004 Reform Act and distributed some or all of the reserves.

“This filing provides us the best way possible to meet our short-term obligations and plan for the future,” said Oscar J. House, CEO and president of USTC. “In no way does this action reflect on the health of the organisation and its ability to continue operations well into the future. In fact, this action is in response to the uncertainty presented by the on-going class action litigation brought against us in 2005. Rest assured that our obligations to our member-growers, employees, suppliers and customers have always been and will continue to be our highest priority and concern.”

The co-operative says it intends to satisfy obligations to its more than 550 member-growers and over 200 employees, and suppliers and customers, as well as reorganise and restructure to honour commitments to stakeholders and ensure the organisation’s sustainable future.

Based in Raleigh, North Carolina, USTC processes US flue-cured tobacco grown by its member-growers in Florida, Georgia, South Carolina, North Carolina, and Virginia. The co-operative reported US$28.8m in revenue for the fiscal year ended 30 April 2021. 

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