Court File No. CV-16-11274-00CL FIRST REPORT TO COURT

Court File No. CV-16-11274-00CL
FIRST REPORT TO COURT
SUBMITTED BY PRICEWATERHOUSECOOPERS INC. IN ITS CAPACITY AS
MONITOR IN THE MATTER OF A PLAN OF COMPROMISE OR
ARRANGEMENT OF 1721027 ONTARIO INC.
February 26, 2016
Court File No. CV-16-11274-00CL
ONTARIO
SUPERIOR COURT OF JUSTICE
(COMMERCIAL LIST)
INTEGRATED PRIVATE DEBT FUND III L.P.,
BY ITS GENERAL PARTNER
INTEGRATED PRIVATE DEBT FUND GP INC.
(the “Applicant”)
and
1721027 ONTARIO INC.
(the “Respondent”)
IN THE MATTER OF THE COMPANIES' CREDITORS ARRANGEMENT ACT,
R.S.C. 1985, c. C-36, AS AMENDED
AND IN THE MATTER OF A PLAN OF COMPROMISE OR ARRANGEMENT OF
1721027 ONTARIO INC.
FIRST REPORT TO THE COURT
SUBMITTED BY PRICEWATERHOUSECOOPERS INC.
IN ITS CAPACITY AS MONITOR OF
1721027 ONTARIO INC.
February 26, 2016
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TABLE OF CONTENTS
A.
INTRODUCTION .......................................................................................................... 4
B.
DISCLAIMER AND TERMS OF REFERENCE............................................................. 5
C.
BACKGROUND............................................................................................................. 6
D.
ACTIVITIES OF THE MONITOR SINCE THE INITIAL ORDER................................ 8
E.
INITIAL CASH FLOW FORECAST VARIANCE ANALYSIS ........................................ 9
F.
EXTENDED CASH FLOW FORECAST ....................................................................... 11
G.
SALE PROCESS ...........................................................................................................13
I.
COMPANY’S REQUEST FOR AN EXTENSION OF THE STAY PERIOD ..................18
J.
RECOMMENDATION .................................................................................................19
APPENDIX
A. Acknowledgement of Filing by Superintendent of Bankruptcy
B. Monitor’s Report on the Initial Cash Flow Forecast
C. Initial Cash Flow Forecast to Actual Comparison
D. Extended Cash Flow Forecast
E. Sale Process
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A. INTRODUCTION
1.
This report (the “First Report”) is filed by PricewaterhouseCoopers Inc. (“PwC”), in its
capacity as monitor (the “Monitor”) in connection with the application made on February 1,
2016 (the “Application”) by Integrated Private Debt Fund III L.P. by way of its general
partner Integrated Private Debt Fund GP Inc. (the “Applicant”) pursuant to the Companies’
Creditors Arrangement Act, R.S.C. 1985, c. C-36, as amended (the “CCAA”) in respect of
1721027 Ontario Inc. operating as Becker Co-generation Plant (“Becker” or the “Company”).
The initial order granted by the Ontario Superior Court of Justice (Commercial List) (the
“Court”) declaring that Becker is a company to which the CCAA applies (the “Initial
Order”).
2.
Pursuant to the Initial Order, KPMG Inc., providing the services of Randy Benson, among
others, was appointed as the Chief Restructuring Advisor (the “Restructuring Advisor”) to
Becker and was authorized to exercise control over, manage, operate and carry on the
Business (as defined in the Initial Order) of Becker subsequent to the granting of the Initial
Order.
3.
The acknowledgement of the CCAA proceedings (“CCAA Proceedings”) was issued by the
Superintendent of Bankruptcy on February 8, 2016, a copy of which is attached hereto as
Appendix “A”.
4.
The purpose of this First Report is to provide the Court with:
a)
background information about the Company and the CCAA Proceedings;
b)
an update on the Company’s actual cash receipts and disbursements since the date of
the Initial Order;
c)
an update on the Monitor’s activities since the date of the Initial Order;
d)
the cash flow forecast for the period from February 22, 2016 to June 5, 2016 as
prepared by the Restructuring Advisor (the “Extended Cash Flow Forecast”) and
the Monitor’s views thereon;
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e)
an outline of the proposed sales strategy and sale process developed by the Monitor, in
conjunction with the Restructuring Advisor, in respect of the Company and its Assets
(as defined herein) (the “Sale Process”);
f)
a summary of the terms of the proposed DIP Term Sheet (as defined herein) and the
Monitor’s view of the Applicant’s request to approve the DIP Facility (as defined
herein) and grant the DIP Lender’s Charge (as defined herein); and
g)
the Monitor’s view on the Applicant’s request for an extension of the Stay Period (as
defined in the Initial Order).
5.
Unless otherwise stated, all monetary amounts contained herein are expressed in Canadian
dollars and exclude harmonized sales tax. Capitalized terms not otherwise defined are as
defined in the sworn Affidavit of Mr. Andrew Shannon dated February 1, 2016, included in the
motion record served February 2, 2016 (the “Shannon Affidavit”) or in the sworn Affidavit
of Mr. Todd Ambachtsheer dated February 25, 2016, included in the motion record of the
Applicant to be heard March 2, 2016 (the “Ambachtsheer Affidavit”).
6.
The Monitor has set up a website at http://www.pwc.com/car-1721027ontarioinc. All
prescribed materials filed by the Applicant and the Monitor relating to the CCAA Proceedings
are available to creditors and other interested parties in electronic format on the Monitor’s
website. The Monitor will make regular updates to the website to ensure creditors and other
interested parties are kept current.
B. DISCLAIMER AND TERMS OF REFERENCE
7.
In preparing this report and conducting its analysis, the Monitor has obtained and relied upon
certain unaudited, draft and/or internal financial information of Becker, the Company’s books
and records and discussions with various parties including the Company’s employees and the
Restructuring Advisor (collectively, the “Information”).
8.
Except as otherwise described in this report:
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a)
the Monitor has not audited, reviewed or otherwise attempted to verify the
accuracy or completeness of the Information in a manner that would wholly or
partially comply with Generally Accepted Assurance Standards pursuant to the
Chartered Professional Accountant Canada Handbook; and
b)
the Monitor has not conducted an examination or review of any financial forecast
and projections in a manner that would comply with the procedures described in
the Chartered Professional Accountant Canada Handbook.
9.
Since the Extended Cash Flow Forecast is based on assumptions regarding future events,
actual results will vary from the information presented even if the hypothetical assumptions
occur, and variations may be material. Accordingly, the Monitor expresses no assurance as to
whether the Extended Cash Flow Forecast will be achieved. We express no opinion or other
form of assurance with respect to the accuracy of any financial information presented in this
First Report, or relied upon by us in preparing this First Report.
C. BACKGROUND
10.
Detailed background information in respect of the Company, a description of its business and
affairs, assets, indebtedness and the causes of its financial difficulties are set out in the
Shannon Affidavit and are summarized briefly in this First Report.
11.
Becker is a private Ontario corporation with its registered head office located in Lively,
Ontario. It operates a biomass fuel-fired co-generation facility located in Haig Township, in
the District of Algoma east of the Town of Hornepayne, Ontario (the “Plant”). The Monitor
understands that the Plant is adjacent to the lumber mill manufacturing facilities (the
“Sawmill”) of Olav Haavaldsrud Timber Company Ltd. (“Olav”), which has entered into an
agreement with Becker (“Fuel Supply Agreement”) to supply biomass fuel to Becker.
Becker is a wholly owned subsidiary of Olav.
12.
The Plant produces electricity and provides steam to Olav’s kiln for drying lumber when the
Sawmill is running. The Plant has been in operation for approximately two years and Becker is
contracted to sell electricity to the Province of Ontario’s (the “Province”) power grid
pursuant to a 10 year Combined Heat and Power III (CHIP III) Power Purchase Agreement
with Ontario Power Authority (now the Independent Electricity System Operator) dated
August 21, 2009 (the “PPA”).
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13.
The Monitor understands from the Shannon Affidavit that Olav shut down operations at the
Sawmill and laid off its employees on or about November 27, 2015 due to ongoing financial
losses. The Sawmill remains closed as of the date of this First Report and as allowed by the
Fuel Supply Agreement, since the commencement of the CCAA Proceedings, Becker has
sourced biomass supply from third parties.
14.
As described in greater detail in the Shannon Affidavit, on November 30, 2015, Becker failed
to make its principal and interest payment to the Applicant as agent pursuant to certain of the
Credit Facilities (as set out and defined in the Shannon Affidavit). The Monitor understands
that as a result of the payment breach under the Credit Agreement (as defined in the Shannon
Affidavit), the Applicant issued default notices to Becker on December 1, 2015 and on
December 8, 2015 and then subsequently issued a demand for repayment and corresponding
notice of intention to enforce security pursuant to section 244 of the Bankruptcy and
Insolvency Act (Canada). The Monitor understands that the indebtedness pursuant to the
Credit Agreement remains outstanding.
15.
As described further in the Shannon Affidavit, counsel on behalf of Olav and Becker advised
on January 26, 2016 that a shareholder of Olav and Becker (Anmar Mechanical and Electrical
Contractors Ltd. or “Anmar”) was no longer prepared to fund operations at Becker or for
Olav to supply biomass fuel to Becker pursuant to the Fuel Supply Agreement but that they
would cooperate to transition Becker into the CCAA Proceedings. The Restructuring Advisor
is currently negotiating a transition services agreement (“TSA”) with management of Anmar
to ensure the ongoing supply of certain services to Becker during the CCAA Proceedings. The
Monitor understands that the former management of Becker (the “Former Management”)
and the management of Anmar are working with the Restructuring Advisor to support
operations at the Plant.
16.
Upon the granting of the Initial Order, the officers and directors of Becker resigned their
positions. As a result, the Restructuring Advisor was appointed to oversee the operations of
Becker during the CCAA Proceedings. The Monitor understands that Becker’s day-to-day
operations have largely stabilized since the commencement of the CCAA Proceedings with the
continued support of the Restructuring Advisor’s involvement.
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D. ACTIVITIES OF THE MONITOR SINCE THE INITIAL ORDER
17.
Since the date of the Initial Order, the Monitor has undertaken, among others, the following
activities:
a)
completed its notice requirements pursuant to subsection 23(1)(a) of the CCAA and
as provided in paragraph 25 of the Initial Order. In particular:
(i)
a notice to creditors in the prescribed form along with a letter from the
Restructuring Advisor to Becker’s suppliers was mailed on February 9,
2016;
(ii)
the Initial Order has been posted to the Monitor’s website along with a
list of creditors owed greater than $1,000 including their names,
addresses and amounts owed, pursuant to the Company’s books and
records;
(iii)
notices of the CCAA Proceedings were published in the Sault Star and
in the Ontario News North on the Road on February 5, 2016 and
February 12, 2016, respectively; and
(iv)
the Monitor’s Report on the Initial Cash Flow Forecast, pursuant to
paragraph 23(1)(b) of the CCAA (the “Monitor’s Report on Cash
Flow”) was filed with the Court on February 10, 2016 and is attached
hereto as Appendix “B”; and
(v)
a copy of the Monitor’s Report on Cash Flow was served on the service
list by email on February 12, 2016.
b)
attended with the Restructuring Advisor at Becker’s head office in Lively, Ontario
on February 3, 2016 to meet with Former Management to discuss operational and
transitional issues related to the CCAA Proceedings and the appointment of the
Restructuring Advisor;
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c)
assisted in the review of operations and maintained communication with the
Restructuring Advisor and Former Management, both directly and through the
Former Management’s representatives;
d)
monitored Becker’s receipts and disbursements;
e)
reported to the Applicant, both directly and through its representatives, on a
regular basis;
f)
communicated with the Company’s creditors, including responding to a variety of
enquiries received from vendors, suppliers and government;
g)
assisted the Restructuring Advisor in the preparation of the Extended Cash Flow
Forecast;
h)
reviewed the DIP Financing Term Sheet (as defined herein) in respect of the
proposed DIP Facility for reasonableness;
i)
engaged
in
discussions
with
the
Restructuring
Advisor
and
PricewaterhouseCoopers Corporate Finance Inc. (“PwCCF”), an affiliate of the
Monitor, in respect of the development of the proposed Sale Process, as described
in further detail below; and
j)
communicated with Former Management in respect of various due diligence
information required for the Sale Process.
E. INITIAL CASH FLOW FORECAST VARIANCE ANALYSIS
18.
Summarized below are the actual cash disbursements for Becker for the period from February
2, 2016 to February 21, 2016 (the “Initial CFF Period”) as compared with the Company’s
forecast cash flow statement filed with the Application (the “Initial Cash Flow Forecast”):
9
1721027 Ontario Inc. o/a Becker Cogeneration
Comparison of Actual Cash Flows to the Initial Cash Flow Forecast
for the period February 2, 2016 to February 21, 2016 ($)
Forecast
Actual
Variance
Opening Cash
1,975,521
1,975,521
Receipts
Electricity Receipts (includes HST)
Total Receipts
-
Disbursements
Product Costs
Payroll & Benefits (incl. Source deductions)
Contract Services
Rental Equipment
Operating Supplies
Selling, General and Administrative
Maintenance Materials & Repairs
Bank Charges
Professional Fees
Total Disbursements
Net Change in Cash [Surplus / (Shortfall)]
Closing Cash
19.
458,700
114,442
86,200
38,627
30,000
14,750
35,000
200,000
977,719
(977,719)
997,802
324,470
34,847
59,987
1,440
12,950
27,926
600
182,814
645,035
(645,035)
1,330,487
(134,230)
(79,595)
(26,213)
(38,627)
(28,560)
(1,800)
(7,074)
600
(17,186)
(332,684)
332,684
332,684
A copy of the actual weekly cash flow variance analysis for the Initial CFF Period in respect of
Becker is attached as Appendix “C” hereto.
20.
During the Initial CFF Period, Becker reported negative cash flow of approximately $645,000
as compared to forecasted negative cash flow of approximately $978,000. The favourable
variance of approximately $333,000 was due to lower than forecasted disbursements as a
result of the following:
a)
product costs were approximately $134,000 lower than forecast due to delays in
sourcing supply post filing and related timing differences. This variance is expected to
reverse in the coming weeks and is reflected in the Extended Cash Flow Forecast;
b)
payroll and benefits (including source deductions) were approximately $80,000 lower
than forecast due to the following:
(i)
forecast payroll of approximately $49,000, which was not disbursed in
the week ended February 7, 2016 of the Initial CFF Period as it was paid
prior to the commencement of the CCAA Proceedings; and
(ii)
forecast source deductions and employer health tax of approximately
$16,000 not disbursed in the week ended February 7, 2016 of the Initial
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CFF Period as it was paid prior to the commencement of the CCAA
Proceedings. Forecast post-filing source deductions, employer health
tax and Workplace Safety and Insurance Board remittances are
expected to reverse in the coming weeks and are included in the
Extended Cash Flow Forecast; and
c)
rental equipment and operating supplies costs were approximately $67,000 lower than
forecast due to timing differences, which are expected to reverse in the coming weeks
and are included in the Extended Cash Flow Forecast.
F. EXTENDED CASH FLOW FORECAST
21.
The Restructuring Advisor has updated the Initial Cash Flow Forecast with the Extended Cash
Flow Forecast, which covers the requested extension of the Stay Period (“Extended Cash
Flow Forecast Period”) and which has been updated based upon the most current
assumptions with respect to the timing and quantum of anticipated cash receipts and
disbursements and reflects certain timing related payments not made in the Initial CFF
Period.
The Extended Cash Flow Forecast was prepared on a weekly basis by the
Restructuring Advisor based on information provided by the Company. The Extended Cash
Flow Forecast is attached hereto as Appendix “D” and is summarized below:
1721027 Ontario Inc. o/a Becker Cogeneration Plant
Summary of Extended Cash Flow Forecast
for the period February 22, 2016 to June 5, 2016 ($)
Forecast
Opening Cash
1,330,487
Receipts
Electricity Receipts (includes HST)
Total Receipts
Disbursements
Product Costs
Payroll & Benefits (incl. Source deductions)
Contract Services
HST/GST
Rental Equipment
Operating Supplies
Selling, General and Administrative
Maintenance Materials & Repairs
Bank Charges
Professional Fees
Total Disbursements
Net Change in Cash [Surplus / (Shortfall)]
Net Cash Before DIP Advances
DIP Advances
Closing Cash
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3,845,581
3,845,581
2,802,773
416,840
306,159
307,160
284,324
78,560
399,035
367,074
3,400
1,085,957
6,051,282
(2,205,701)
(875,214)
1,300,000
424,786
22.
The Extended Cash Flow Forecast has been prepared by the Restructuring Advisor for the
purpose described in the notes to and assumptions underlying the Extended Cash Flow
Forecast using the probable and hypothetical assumptions set out therein.
23.
The Extended Cash Flow Forecast reflects the Restructuring Advisor’s current estimate of the
forecast cash receipts and disbursements that will be realized by Becker and the estimate of
Becker’s DIP Financing requirements during the Extended Cash Flow Forecast Period. The
Extended Cash Flow Forecast indicates that Becker will have sufficient liquidity, subject to this
Court’s approval of the Applicant’s request for DIP Financing, to continue operating for the
requested extension of the Stay Period.
24.
The Monitor’s review of the Extended Cash Flow Forecast consisted of inquiries, analytical
procedures and discussions related to information supplied to it by the Restructuring Advisor.
Since hypothetical assumptions need not be supported, the Monitor’s procedures with respect
to them were limited to evaluating whether they were consistent with the purpose of the
Extended Cash Flow Forecast. The Monitor has also reviewed the support provided by the
Restructuring Advisor for the probable assumptions, and the preparation and presentation of
the Extended Cash Flow Forecast.
25.
Based on the Monitor’s review, nothing has come to its attention that causes it to believe that,
in all material respects:
a)
the hypothetical assumptions are not consistent with the purpose of the Extended
Cash Flow Forecast;
b)
as at the date of this report, the probable assumptions developed by the
Restructuring Advisor are not suitably supported and consistent with the plan of
Becker or do not provide a reasonable basis for the Extended Cash Flow Forecast,
given the hypothetical assumptions; or
c)
the Extended Cash Flow Forecast does not reflect the probable and hypothetical
assumptions.
26.
The Extended Cash Flow Forecast has been prepared solely for the purpose described herein
and readers are cautioned that it may not be appropriate for other purposes.
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G. SALE PROCESS
27.
Pursuant to the Initial Order, the Monitor was directed and empowered to develop a Sale
Process with the assistance of the Restructuring Advisor. Capitalized terms not defined below
are as defined in the Sale Process, which is attached as Appendix “E”.
28.
As further described in the Initial Order, the Monitor is at liberty to engage such other persons
as the Monitor deems necessary or advisable with respect to exercising its powers and
performing its obligations under the Initial Order. In this regard, the Monitor proposes to
work with PwCCF to assist it with the implementation of the proposed Sale Process, whereby
the Monitor, with the assistance of PwCCF would market and solicit bids in respect of a sale of
the Company’s assets (collectively, the “Assets”).
29.
The Applicant seeks, and the Monitor supports, the Court’s approval of the Sale Process. The
principal elements of the Sale Process are as follows:
a)
the sale of the Assets will be on an “as is, where is” basis without representations or
warranties of any kind, nature or description except to the extent as may be set forth in
a Binding APA signed by the Restructuring Advisor and the Successful Bidder and
approved by this Court; and
b)
the Monitor will, with the assistance of the Restructuring Advisor and, as necessary, in
consultation with the DIP Lender (as defined hereafter):
(i)
compile a list of prospective purchasers (“Prospective Purchasers”) to
whom the Teaser Letter (as defined hereinafter) will be distributed;
(ii)
prepare an initial offering summary (the “Teaser Letter”) notifying
Prospective Purchasers of the existence of the Sale Process and inviting
Prospective Purchasers to express their interest in making an offer for the
Assets pursuant to the terms of the Sale Process;
(iii)
prepare an advertisement and the posting of the advertisement, within three (3)
business days following the granting of an Order approving the proposed Sale
Process (the “Sale Process Order”) in The Globe and Mail (National
13
Edition) and any other relevant publication that may advertise and potentially
solicit interest in the Assets;
(iv)
distribute non-disclosure agreements (“NDA”) to Prospective Purchasers;
(v)
determine the Phase 1 Qualified Bidders pursuant to the Sale Process, based on:
1. a Prospective Purchaser delivering the NDA; and
2. the Monitor, in consultation with the Restructuring Advisor and DIP
Lender, agreeing that the Prospective Purchaser has a bona fide
interest in the acquisition of the Assets and has the financial
capability to consummate such a transaction;
(vi)
prepare and distribute to each Phase 1 Qualified Bidder a confidential
information
memorandum
(“CIM”)
providing,
among
other
things,
information considered relevant to the Sale Process;
(vii)
open and manage access, to an online data repository (“Data Room”) and
assist in organizing, compiling and reviewing the information to be included in
the Data Room in order to facilitate due diligence attributed to the Sale Process;
(viii)
respond to information requests, facilitate working sessions and visits to the
Plant (upon request) in respect of the Phase 1 Qualified Bidders;
(ix)
prepare and distribute a template asset purchase agreement (“APA”) for review
by Phase 1 Qualified Bidders and for submission of a bid for the purchase of the
Assets (“Non-Binding APA”), which is required to be delivered by May 2,
2016 at 5:00 p.m. (EST) (the “Non-Binding APA Deadline”);
(x)
evaluate Non-Binding APA submissions to determine whether a Non-Binding
APA can be considered a Qualified APA and whether such Phase 1 Qualified
Bidder will be deemed to be a Phase 2 Qualified Bidder;
(xi)
assist Phase 2 Qualified Bidder(s) in completing, among other things, due
diligence with a view of submitting a Binding APA on or before June 15, 2016
(the “Binding APA Deadline”); and
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c)
the Restructuring Advisor, in consultation with the Monitor and the DIP Lender, will
evaluate the final Binding APA submissions with a view of selecting and determining a
Successful APA;
d)
Court approval of a Successful APA will be sought on or before June 30, 2016; and
e)
the Restructuring Advisor will close the transaction associated with the Successful APA
on or before July 15, 2016 (the “Closing Date”).
30.
A copy of the Sale Process, if approved by the Court, will be posted to the Monitor’s website.
31.
The Applicant and the DIP Lender will not be participants in the Sale Process to the extent of
submitting a bid or credit bit (or any combination thereof).
32.
The Monitor is of the view that the proposed Sale Process is reasonable in the circumstances
given the specialized nature of the Assets and the third party contractual agreements relating
to the Business. The proposed Sale Process provides for a reasonable time period
(approximately 4 months) to market the Assets to Prospective Purchasers, to support the due
diligence of Qualified Phase 1 Bidders, to negotiate a Binding APA, to seek Court approval of
the Binding APA and close a sale transaction.
33.
The Monitor supports the proposed Sale Process and further understands that the Applicant
and the DIP Lender supports the Sale Process, as it represents the most efficient and fair
process to realize maximum value for the benefit of the Company’s stakeholders.
H. DIP FINANCING
34.
Pursuant to the Initial Order, the Restructuring Advisor was authorized to seek out debtor in
possession financing (“DIP Financing”) in an amount not to exceed $5 million and to
negotiate the terms of definitive DIP Financing documents for and on behalf of Becker, which
would be subject to Court approval. Capitalized terms not defined below are as defined in the
executed DIP Financing term sheet (the “DIP Term Sheet”), which is attached as Exhibit “C”
to the Ambachtsheer Affidavit.
35.
The Restructuring Advisor, on behalf of the Company, has negotiated with Integrated Asset
Management Corp. (the “DIP Lender”) a super priority debtor-in-possession, non-revolving
15
credit facility (the “DIP Facility”) up to a maximum principal amount of $3,000,000, subject
to the terms and conditions contained in the DIP Term Sheet.
36.
The Monitor understands that the Applicant is a fund of assets managed by IAM Private Debt
Corp. (“IAM Private Debt”), which is a wholly-owned subsidiary of the DIP Lender. While
the DIP Lender is an affiliate of the Applicant, the Monitor understands that the DIP Lender
does not have investments in or currently provide advances to the Company.
37.
As set out within the DIP Term Sheet, the purpose of the DIP Facility is to provide for the
short-term liquidity needs of the Company while under CCAA protection including the uses
described therein.
38.
As further set out within the DIP Term Sheet, the DIP Lender’s agreement to make advances
to the Company under the DIP Facility (“DIP Advances”) is subject to the satisfaction of
certain Funding Conditions (as defined and set out therein), including, but not limited to, the
following:
a)
the Court shall have issued an order on or before March 2, 2016, in a form satisfactory
to the DIP Lender, in its absolute discretion (the “DIP Financing Order”), approving
the DIP Term Sheet and DIP Facility and granting the DIP Lender a super priority
charge in the principal amount of $3,300,000 (the “DIP Lender Charge”); and
b)
the DIP Financing Order shall provide that the DIP Lender’s Charge shall have priority
over all Liens (as defined in the DIP Term Sheet), except for the Administration Charge
and the Restructuring Advisor Charge.
39.
The DIP Term Sheet provides that each DIP advance (“DIP Advance”) shall be available to
Becker in Canadian dollars in a multiple of $100,000, and shall bear interest at a rate of 8%
per annum. Interest on DIP Advances shall accrue monthly in arrears and be added to the
principal amount outstanding under the DIP Facility on the first Business Day (as defined in
the DIP Term Sheet) of each month.
40.
Pursuant to the DIP Term Sheet, Becker shall pay to the DIP Lender a standby fee equal to 1%
of the undrawn portion of the principal amount of the DIP Facility (the “Standby Fee”),
which amount shall accrue monthly in arrears and be added to the principal amount
outstanding under the DIP Facility on the first Business Day of each month.
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41.
As the interest and Standby Fees accrue monthly and are added to the principal amount, the
DIP Lender Charge is required to be in excess of the principal amount of the DIP Facility.
42.
The DIP Facility, including all accrued interest and Standby Fees, shall be repayable in full on
the Maturity Date as set out and defined in the DIP Term Sheet.
43.
The DIP Term Sheet also requires that every six (6) weeks following the granting of the DIP
Financing Order, Becker shall provide the DIP Lender with an updated Cash Flow Budget (as
defined therein) in form and substance satisfactory to and approved by the DIP Lender,
together with (i) a comparison prepared by the Restructuring Advisor of the previous six (6)
week’s forecast to actual results (i.e. a week in arrears), and (ii) an explanation of any
differences.
44.
As described earlier in this First Report, the Extended Cash Flow Forecast reflects the
Restructuring Advisor’s estimate of Becker’s DIP Financing requirements for the Extended
Cash Flow Period and indicates that Becker will require the DIP Financing to fund continuing
operations and the CCAA Proceedings during the requested extension of the Stay Period.
45.
The Monitor understands that there was no competitive process to source DIP Financing.
However, given the terms and conditions of the DIP Term Sheet, the Monitor is of the view
that it is unlikely that a significantly superior proposal would be achievable for the following
reasons:
a)
the specialized nature and remote location of the Assets are such that market interest
rates to fund operations for this type of asset could be in the range of 14% to 18%, or
nearly double the interest rate contemplated by the DIP Lender; and
b)
there are a limited number of lenders willing to provide secured financing, including
DIP Financing, for these type of assets.
46.
The Monitor supports the DIP Financing as contemplated in the DIP Term Sheet for the
following reasons:
a)
the DIP Term Sheet provides that DIP Advances would bear an interest rate of 8% per
annum which is reasonable in the circumstances as it is in the range of the default
17
interest rate of applicable to the Company’s Indebtedness under the Credit Agreement
subsequent to its default on November 30, 2015;
b)
the Standby Fee is reasonable and generally in line with market. The Extended Cash
Flow Forecast predicts that approximately $1,300,000 will be outstanding under the
DIP Facility at the end of the requested extension of the Stay Period. Accordingly the
accrued Standby Fee during the Extended Cash Flow Forecast Period is expected to be
less than approximately $7,000, which is de minimis;
c)
the size of the DIP Facility (maximum of $3,000,000) and the type of Assets are such
that there is a limited number of lenders that would consider providing DIP Financing
secured by Becker’s Assets; and
d)
the Applicant supports the DIP Financing.
I. COMPANY’S REQUEST FOR AN EXTENSION OF THE STAY PERIOD
47.
The Applicant is seeking an extension of the Stay Period to June 2, 2016 in order to continue
operations at the Plant and to allow for the implementation of the Sale Process, which could
result in a sale of the Company’s Assets that creates value for the benefit of Becker’s
stakeholders.
48.
The Monitor supports the Applicant’s request for an extension of the Stay Period for the
following reasons:
a)
to allow for the implementation of the Sale Process, if approved by this Court;
b)
the Applicant and Restructuring Advisor support the request for the extension of
the Stay Period;
c)
the Company continues to act in good faith and with due diligence; and
d)
the Extended Cash Flow Forecast indicates that Becker will have sufficient liquidity
to continue to fund operations during the requested extension of the Stay Period,
subject to this Court’s approval of the DIP Facility.
18
J. RECOMMENDATION
49.
The Monitor recommends that the Court approve and grant the following relief requested by
the Applicant:
a)
approval of the DIP Facility in the amount of $3,000,000 offered by the DIP Lender
and the granting of the DIP Lender’s Charge in favour of the DIP Lender in the
maximum amount of $3,300,000 in priority to all other charges and encumbrances
against the Respondent’s Property, except the Administration Charge and the
Restructuring Advisor Charge;
b)
approval of the Sale Process and authorizing the Monitor, in conjunction with the
Restructuring Advisor, to implement and conduct the Sale Process in accordance with
its terms and conditions;
c)
extend the Stay Period to June 2, 2016; and
d)
approve the First Report and the activities of the Monitor as described therein.
All of which is respectfully submitted at Toronto, Ontario, this 26th day of February, 2016.
PricewaterhouseCoopers Inc.,
in its capacity as the Monitor of 1721027 Ontario Inc.
and not in its personal capacity
Michelle Pickett
Senior Vice President
19
APPENDIX A
District of
File Number:
Ontario
0000281-2016-ON
In the Matter of the Companies’ Creditors Arrangement Act proceedings of:
1721027 Ontario Inc.
Debtor
PricewaterhouseCoopers Inc.
Monitor
Date of the Initial Order:
Documents Filing Date:
February 02, 2016
February 03, 2016
ACKNOWLEDGEMENT OF FILING – Initial Application, Initial Order
This is to acknowledge receipt of the initial application and initial order filed in respect of the aforenamed debtor,
pursuant to the provisions of paragraph 23(1)(f) of the Companies’ Creditors Arrangement Act.
The aforenamed Monitor is required:
-
to file with the Superintendent of Bankruptcy, the prescribed Form 2 of the schedule, entitled “Debtor
Company Information Summary (Commencement of Proceedings)”, within five business days after the
day on which the monitor receives the initial order.
Acknowledgement issued on:
February 8, 2016
District of
File Number:
Ontario
0000281-2016-ON
In the Matter of the Companies’ Creditors Arrangement Act proceedings of:
1721027 Ontario Inc.
Debtor
PricewaterhouseCoopers Inc.
Monitor
Date of the Initial Order:
Document Filing Date:
February 02, 2016
February 03, 2016
ACKNOWLEDGEMENT OF FILING - FORM 1
This is to acknowledge receipt of the prescribed Form 1 of the schedule, entitled “Information Pertaining to the
Initial Order”, in respect of the aforenamed debtor, pursuant to the provisions of paragraph 23(1)(f) of the
Companies’ Creditors Arrangement Act.
The aforenamed Monitor is required:
to file with the Superintendent of Bankruptcy, the initial application, the initial order and any amendments
to that order, within two business days after the day on which the monitor receives them.
Note:
Acknowledgement issued on:
February 8, 2016
Designated Analyst at the Office of the Superintendent of Bankruptcy:
Name of the Analyst:
Jonathan Lee
Email address:
[email protected]
Telephone number:
604-666-5685
Facsimile:
604-666-4610
Mailing address:
Office of the Superintendent of Bankruptcy – CCAA Team
300 Georgia Street W, Suite 2000
Vancouver, British Columbia V6B 6E1
District of
File Number:
Ontario
0000281-2016-ON
In the Matter of the Companies’ Creditors Arrangement Act proceedings of:
1721027 Ontario Inc.
Debtor
PricewaterhouseCoopers Inc.
Monitor
Date of the Initial Order:
Document Filing Date:
February 02, 2016
February 03, 2016
ACKNOWLEDGEMENT OF FILING - FORM 2
This is to acknowledge receipt of the prescribed Form 2 of the schedule, entitled “Debtor Company Information
Summary (Commencement of Proceedings)”, in respect of the aforenamed debtor, pursuant to the provisions of
paragraph 23(1)(f) of the Companies’ Creditors Arrangement Act.
The aforenamed Monitor is required:
-
to file with the Superintendent of Bankruptcy, the prescribed Form 3 of the schedule, entitled “Debtor
Company Information Summary (Following the Order Discharging the Monitor)”, within five business
days after the day on which the court makes an order discharging the monitor.
Acknowledgement issued on:
February 8, 2016
APPENDIX B
APPENDIX C
1721027 Ontario Inc.
Cash Flow Forecast to Actual
For the period February 2, 2016 to February 21, 2016
Week Ended - February 7, 2016
CAD$
Week 1
Week ending
Forecast
Actual
Variance $
Opening Cash
1,975,521
1,975,521
Receipts
Electricity Receipts (includes HST)
Total Receipts
Disbursements
Product Costs
Payroll & Benefits (incl. Source deductions)
Contract Services
Rental Equipment
Operating Supplies
Selling, General and Administrative
Maintenance Materials & Repairs
Bank Charges
Professional Fees
Total Disbursements
-
-
-
Week Ended - February 14, 2016
Week 2
Forecast
Actual
Variance $
1,746,647
1,975,521
228,874
-
-
-
Week Ended - February 21, 2016
Week 3
Forecast
Actual
Variance $
1,482,963
1,734,263
251,300
-
-
-
For the period February 2 to February 21
Cumulative Weeks Ended Week 1 to 3
Forecast
Actual
Variance $
1,975,521
1,975,521
-
-
-
-
147,780
48,894
32,200
228,874
-
(147,780)
(48,894)
(32,200)
(228,874)
155,460
16,654
14,500
2,070
30,000
10,000
35,000
263,684
196,363
38,547
3,789
300
2,260
241,258
40,903
(16,654)
24,047
(2,070)
(30,000)
(10,000)
(31,211)
300
2,260
(22,426)
155,460
48,894
39,500
36,557
4,750
200,000
485,161
128,108
34,847
21,441
1,440
12,950
24,137
300
180,554
403,776
(27,352)
(14,047)
(18,059)
(36,557)
1,440
8,200
24,137
300
(19,446)
(81,385)
458,700
114,442
86,200
38,627
30,000
14,750
35,000
200,000
977,719
324,470
34,847
59,987
1,440
12,950
27,926
600
182,814
645,035
(134,230)
(79,595)
(26,213)
(38,627)
(28,560)
(1,800)
(7,074)
600
(17,186)
(332,684)
Net Change in Cash [Surplus / (Shortfall)]
(228,874)
-
228,874
(263,684)
(241,258)
22,426
(485,161)
(403,776)
81,385
(977,719)
(645,035)
332,684
Closing Cash
Adjustments
Adjusted Closing Cash
1,746,647
1,746,647
251,300
251,300
997,802
997,802
1,975,521
1,975,521
228,874
228,874
1,482,963
1,482,963
1,734,263
1,734,263
1,330,487
1,330,487
332,684
332,684
997,802
997,802
1,330,487
1,330,487
332,684
332,684
APPENDIX D
1721027 Ontario Inc. o/a Becker Cogeneration Plant
Extended Cash Flow Forecast
Week #
Week Ending
1
2
3
4
5
28-Feb-16 6-Mar-16 13-Mar-16 20-Mar-16 27-Mar-16
Opening Cash Balance
1,330,487
Cash Receipts
Electricity Receipts
Other Receipts
Total Cash Receipts
Cash Disbursements
Product Costs
Payroll & Benefits
Contract Services
HST / GST
Rental Equipment
Operating Supplies
Selling / General / Admin
Maintenance Materials & Repairs
Bank Charges
Professional Fees
Total Cash Disbursements
Net Receipts / (Disbursements)
Closing Cash Balance - Excluding DIP
DIP Advances
Adjusted Closing Cash Balance
Cumulative DIP Advances
-
756,344
731,256
731,256
804,383
-
312,721
-
6
7
8
3-Apr-16 10-Apr-16 17-Apr-16
77,285
73,537
-
802,210
802,210
451,293
-
238,528
-
Forecast
9
24-Apr-16
17,401
-
10
1-May-16
25,750
1,136,464
1,136,464
11
12
13
14
8-May-16 15-May-16 22-May-16 29-May-16
842,497
-
354,732
-
16,104
-
44,193
1,175,652
1,175,652
15
5-Jun-16
Total
725,287
1,330,487
-
3,845,581
3,845,581
240,210
19,111
24,853
93,597
6,187
51,343
10,691
400
127,751
574,142
291,060
56,818
46,453
6,187
18,657
10,691
253,352
683,217
291,060
24,853
26,187
65,747
70,691
13,125
491,662
257,460
56,818
31,100
4,750
85,308
435,436
212,260
9,500
84,127
45,200
38,536
1,000
13,125
403,748
196,980
56,818
31,100
42,747
5,850
90,958
424,453
137,200
9,500
52,940
13,125
212,765
137,200
56,818
22,700
20,000
4,750
79,658
321,126
92,000
9,500
92,290
45,200
38,536
1,000
13,125
291,651
137,200
56,818
22,700
6,190
5,850
90,958
319,716
137,200
9,500
52,940
275,000
13,125
487,765
179,536
56,818
22,700
20,000
59,574
338,628
179,536
9,500
4,750
78,125
271,911
134,336
56,818
22,700
130,744
45,200
38,536
1,000
65,224
494,558
179,536
9,500
6,190
15,850
89,425
300,501
2,802,773
416,840
306,159
307,160
284,324
78,560
399,035
367,074
3,400
1,085,957
6,051,282
(574,142)
48,039
(491,662)
(435,436)
(403,748)
377,756
(212,765)
(321,126)
(291,651)
816,747
(487,765)
(338,628)
(271,911)
681,094
(300,501)
(2,205,701)
756,344
756,344
804,383
804,383
312,721
312,721
(122,715)
200,000
77,285
(326,463)
400,000
73,537
451,293
451,293
238,528
238,528
(82,599)
100,000
17,401
(274,250)
300,000
25,750
842,497
842,497
354,732
354,732
16,104
16,104
(255,807)
300,000
44,193
725,287
725,287
424,786
424,786
(875,214)
1,300,000
424,786
200,000
600,000
600,000
600,000
700,000
1,000,000
1,000,000
1,000,000
1,300,000
1,300,000
-
-
-
1,000,000
1,300,000
1,300,000
1721027 Ontario Inc. o/a Becker Cogeneration (the "Company")
Assumptions to Cash Flow Forecast
for the period February 2, 2016 to June 5, 2016
1 The purpose of the statement of projected cash flow (the "CFF") for the period February 2, 2016 to June 5, 2016 is to comply with the provisions of the Companies’ Creditors Arrangement Act (“CCAA”). The
CFF has been prepared based on probable assumptions detailed below. Actual results will vary from the projections and such variations may be material.
2 The statement of projected cash flow has been prepared in a going concern scenario as the Company will continue operating activities subject to obtianing the necessary DIP Financing.
3 Electricity generation receipt projections are based on historical electricity generation, the contracted power price and management's best estimates of future electricity generation. Receipts are paid on the
last business day one month in arrears.
4 Electricity generation production costs include those in respect of the biomass fuel supply and diesel for fuel handling equipment. Biomass fuel supply costs are based on historical and anticipated biomass
harvesting and hauling costs. Diesel fuel costs are based on historical equipment usage rates and the expected market price for diesel.
5 Supply of essential goods and services are assumed to continue to be available to the Company during the period of the CFF with payments to vendors made on terms agreed with the suppliers.
6 Payroll and related employee costs reflect anticipated staffing levels to sustain operations.
7 Contracted services include labour required to support operations, based on contracted labour rates and anticipated staffing required to support operations.
8 Harmonized Sales Tax "HST" is assumed to be paid one month in arrears.
9 Rental equipment estimates are based on the terms of various lease agreements and anticipated lease agreements.
10 Operating supplies include chemical and safety supplies and are based on historic levels and management's estimates going forward.
11 Selling, general and administrative expenses are estimates based on historical and anticipated expense levels.
12 Maintenance materials and repairs are based on historical levels and management's estimates.
13 Bank fees are based anticipated fees.
14 Professional fees represent the timing and quantum of anticipated payment of professional fees and disbursements.
15 The CFF is denominated in Canadian dollars.
APPENDIX E
Sale Process
Set forth below is the sale process (the “Sale Process”) to be employed with respect to the
proposed sale of all or substantially all of the business and assets (the “Assets”) of 1721027 Ontario Inc.,
operating as Becker Cogeneration Plant (“Becker”).
On February 2, 2016, Integrated Private Debt Fund III L.P., by its general partner Integrated
Private Debt Fund GP Inc. (the “Applicant Party”), commenced proceedings under the Companies’
Creditors Arrangement Act (the “CCAA” and the “CCAA Proceedings”) in respect of Becker. Pursuant to
an Order of the Ontario Superior Court of Justice (the “Court”) dated February 2, 2016 (the “Initial
Order”), Justice Newbold granted Becker protection pursuant to the CCAA. On [March 2, 2016], the
Initial Order was amended and restated to, among other things, approve a debtor-in-possession financing
term sheet (the “DIP Term Sheet”) among Becker and Integrated Asset Management Corp. (the “DIP
Lender”).
Pursuant to the Initial Order, PricewaterhouseCoopers Inc. was appointed by the Court as the
monitor of Becker (the “Monitor”), and KPMG Inc., providing the services of Randy Benson, among
others, was appointed to act as chief restructuring advisor to Becker (the “Restructuring Advisor”).
Pursuant to the Initial Order, the Monitor was authorized to develop a sale strategy and process
to be conducted by the Monitor, together with the assistance of the Restructuring Advisor, to pursue all
avenues of sale of the business or property, in whole or in part, of Becker, subject to prior approval of the
Court of any sale.
In this regard, PricewaterhouseCoopers Corporate Finance Inc. (“PwCCFI”), an affiliate of the
Monitor, will assist the Monitor in conducting the Sale Process described herein, with the assistance of
the Restructuring Advisor and under the supervision of the Monitor, with the approval of the Court
pursuant to a Court order dated [March 2, 2016] (the “Sale Process Order”). All qualified interested
parties will be provided with an opportunity to participate in the Sale Process. The Sale Process is
intended to solicit interest in an acquisition of the Assets, under a fair and competitive sale process
pursuant to which all qualified interested parties will be provided with a fair and equal opportunity to
participate in the Sale Process.
Notwithstanding anything contained herein, the Restructuring Advisor, on consent of the Monitor
and the DIP Lender, shall have the right to enter into an exclusive transaction for the sale of the Assets,
or any portion thereof, outside of the Sale Process prior to the selection of a Successful APA (as defined
herein).
The Applicant Party and the DIP Lender will not be participants in the Sale Process to the extent
of submitting a bid, or credit bid (or any combination thereof).
Timeline
The following table sets out the key milestones under the Sale Process:
Milestone
Deadline
Non-Binding APA Deadline
May 2, 2016
Binding APA Deadline
June 15, 2016
Sale Approval Motion
June 30, 2016
Closing Date
July 15, 2016
-2-
Subject to the terms contained herein and any Order of the Court, the dates set out in the Sale
Process may be extended by the Monitor, with the approval of the Restructuring Advisor and the DIP
Lender.
Sale Process
The Sale Process set forth herein describes, among other things: (i) the Assets available for sale,
(ii) the manner in which prospective bidders may gain access to or continue to have access to due
diligence materials concerning the Assets, (iii) the manner in which bidders can become a Phase 1
Qualified Bidder (as defined herein), (iv) the timing of delivering a Non-Binding APA (as defined herein),
(v) the manner in which bids are to be received and negotiated, (vi) the ultimate selection of any
Successful Bidder (as defined herein) and the process leading up to that selection, and (vii) the approval
thereof by the Court. The Monitor intends to consult with the Restructuring Advisor, the DIP Lender, and
their respective advisors throughout the Sale Process.
Assets To Be Sold
Becker, in accordance with this Sale Process being administered by the Monitor, in consultation
with the Restructuring Advisor, is offering for sale, in one or more transactions, the Assets. The Monitor
reserves the right to eliminate certain assets available for sale pursuant to the Sale Process prior to the
Non-Binding APA Deadline (as defined below), in consultation with the Restructuring Advisor and the DIP
Lender.
“As Is, Where Is”
The sale of the Assets will be on an “as is, where is” basis without representations or warranties
of any kind, nature or description by the Monitor, the Restructuring Advisor or Becker, or any of their
respective directors, officers, partners, employees, agents, advisors or estates, except to the extent set
forth in a Binding APA (as defined herein) signed by the Restructuring Advisor and the Successful Bidder
and approved by the Court. By submitting a bid, each Potential Bidder (as defined below) shall be
deemed to acknowledge and represent that it has had an opportunity to conduct any and all due diligence
regarding the Assets prior to making its bid, that it has relied solely upon its own independent review,
investigation and/or inspection of any documents and/or the Assets in making its bid, and that it did not
rely upon any written or oral statements, representations, warranties, or guarantees, express, implied,
statutory or otherwise, regarding the Assets or the completeness of any information provided in
connection therewith, except as expressly stated in this Sale Process or as set forth in a Binding APA
signed by the Restructuring Advisor and the Successful Bidder and approved by the Court.
Free Of Any And All Claims And Interests
Except as may otherwise be provided in the Successful Bidder’s Binding APA, all of the rights,
title and interests of Becker in and to the Assets, or any portion thereof, will be sold free and clear of all
Liens and Claims (which may be defined in an Approval and Vesting Order (as defined herein), subject to
any Permitted Encumbrances (which may be defined in an Approval and Vesting Order), pursuant to an
order by the Court approving the sale of the Assets, or a portion thereof, and vesting in the Successful
Bidder all of Becker’s rights, title and interests in and to such Assets, or a portion thereof, by way of an
approval and vesting order (the “Approval and Vesting Order”). For greater certainty, such Liens and
Claims are to attach to the net proceeds of the sale of such Assets following the granting of the Approval
and Vesting Order.
-3-
Publication Notice
Within three (3) business days of the granting of the Sale Process Order by the Court, or as soon
as practicable thereafter the Monitor shall publish notice of this Sale Process: (i) in The Globe and Mail
(National Edition), and (ii) in any other relevant publication that may advertise and potentially solicit
interest in the Assets.
Solicitation of Interest
As soon as reasonably practicable after the granting of the Sale Process Order, the Monitor, with
the assistance of the Restructuring Advisor, will prepare an initial offering summary (the “Teaser Letter”)
notifying prospective purchasers of the existence of the Sale Process and inviting prospective purchasers
to express their interest in making an offer for the Assets pursuant to the terms of the Sale Process.
Participation Requirements
Unless otherwise ordered by the Court or as otherwise determined by the Monitor, in consultation
with the Restructuring Advisor and the DIP Lender, each person who wishes to participate in the Sale
Process, (a “Potential Bidder”) must deliver to the Monitor, an executed non-disclosure agreement
(“NDA”), in the form attached herein as Schedule “A”, prior to the distribution of any confidential
information by the Monitor.
If it is determined by the Monitor, in its reasonable business judgment, in consultation with the
Restructuring Advisor and the DIP Lender, that a Potential Bidder: (i) has a bona fide interest in an
acquisition of the Assets; (ii) has delivered the NDA; and (iii) has the financial capability (based on the
availability of financing, experience, the Potential Bidder’s financial information and other considerations)
to consummate such a transaction, then such Potential Bidder will be deemed by the Monitor to be a
“Phase 1 Qualified Bidder”.
The Monitor, with the assistance of the Restructuring Advisor, will prepare and send to each
Phase 1 Qualified Bidder and the DIP Lender, as soon as reasonably practicable, a confidential
information memorandum which will provide, among other things, information considered relevant to the
Sale Process.
Due Diligence
The Monitor, in conjunction with the Restructuring Advisor, in their reasonable business
judgment, and subject to competitive and other business considerations, may give each Phase 1
Qualified Bidder, such access to due diligence materials and information relating to the Assets as the
Monitor and the Restructuring Advisor deem appropriate. Due diligence access may include access to an
electronic data room (a “Data Room”), on-site inspections, and other matters which a Phase 1 Qualified
Bidder may reasonably request and as to which the Monitor and the Restructuring Advisor, in their
reasonable business judgment, may agree. The Monitor will designate a representative to coordinate all
reasonable requests for additional information and due diligence access from Phase 1 Qualified Bidders
and the manner in which such requests must be communicated. Neither the Monitor, the Restructuring
Advisor, Becker nor any of their affiliates (or any of their respective representatives) will be obligated to
furnish any information relating to the Assets to any person other than to Phase 1 Qualified Bidders. The
Monitor, the Restructuring Advisor and Becker make no representation or warranty as to the information
to be provided through this due diligence process or otherwise, except as set forth in a Binding APA with
the Successful Bidder.
Non-Binding APA Deadline
A Phase 1 Qualified Bidder that desires to make a bid shall deliver written copies of its bid, in the
-4-
form of the template asset purchase agreement located in the Data Room (the “APA”), together with a
blackline outlining all changes made to the APA (a “Non-Binding APA”), to each of the following parties
(collectively, the “Notice Parties”): (i) PwCCFI, Attention: Frederic Bouchard, fax 514-205-5363, email:
[email protected], (ii) the Monitor, Attention: Michelle Pickett, fax 416-814-3210, email:
[email protected], and (iii) the Restructuring Advisor, Attention: Todd Ambachtsheer, fax
416-777-3364, email [email protected], so as to be received by the Notice Parties no later than
May 2, 2016 at 5:00 p.m. (ET) (as may be extended as set out below, the “Non-Binding APA Deadline”).
The Monitor, after consultation with the Restructuring Advisor, may extend the Non-Binding APA
Deadline, with the consent of the DIP Lender, once or successively, but is not obligated to do so. If the
Non-Binding APA Deadline is extended, the Monitor will promptly notify all Phase 1 Qualified Bidders and
the Notice Parties.
Qualified APA
A Non-Binding APA will be considered a qualified APA only if the Non-Binding APA is submitted
by a Phase 1 Qualified Bidder and complies with all of the following (a “Qualified APA”):
a) the bid (either individually or in combination with other bids that make up one Qualified
APA) is an offer to purchase some or all of the Assets on terms and conditions
reasonably acceptable to the Monitor, as determined after consultation with the Monitor
and the Restructuring Advisor;
b) it is duly authorized and executed, and includes a purchase price for the Assets
expressed in Canadian dollars (the “Purchase Price”), together with all exhibits,
schedules and all applicable ancillary agreements thereto, and the proposed orders to
approve the sale by the Court (if any);
c) it includes written evidence of a firm, irrevocable commitment for financing or other
evidence of ability to consummate the proposed transaction, that will allow the Monitor, in
consultation with the Restructuring Advisor and the DIP Lender, to make a reasonable
determination as to the Phase 1 Qualified Bidder’s financial and other capabilities to
consummate the proposed sale and pay the Purchase Price;
d) it provides all of the conditions associated with unperformed due diligence that is required
to be conducted in order to proceed with a Binding APA. For greater certainty, such
conditions cannot relate to any financing condition;
e) it fully discloses the identity of each entity that will be bidding for the Assets or otherwise
sponsoring, financing, participating or benefiting from such bid;
f)
it includes an acknowledgement and representation of the Phase 1 Qualified Bidder that:
(i) it has relied solely upon its own independent review, investigation and/or inspection of
any documents and/or the Assets in making its bid, and (ii) it did not rely upon any written
or oral statements, representations, warranties, or guarantees whatsoever, whether
express, implied, statutory or otherwise, regarding the Assets or the completeness of any
information provided in connection therewith;
g) it includes evidence, in form and substance reasonably satisfactory to the Monitor, of
authorization and approval from the Phase 1 Qualified Bidder’s board of directors (or
comparable governing body) with respect to the submission, execution and delivery of
the Qualified APA submitted by the Phase 1 Qualified Bidder; and
h) it is received by the Non-Binding APA Deadline.
-5-
The Monitor may determine, in consultation with the Restructuring Advisor and the DIP Lender,
whether to entertain bids for the Assets that do not conform to one or more of the requirements specified
herein and deem such bids to be a Qualified APA; provided that the Monitor, in evaluating such bids, may
not waive substantial compliance with any of the above requirements without prior written consent of the
Restructuring Advisor and the DIP Lender.
The Monitor shall notify each Phase 1 Qualified Bidder in writing as to whether such Phase 1
Qualified Bidder’s APA constituted a Qualified APA within three (3) business days following the expiration
of the Non-Binding APA Deadline, or at such later time as the Monitor deems appropriate after
consultation with the Restructuring Advisor. If such notification is provided, then such Phase 1 Qualified
Bidder will be deemed to be a “Phase 2 Qualified Bidder”.
If the Monitor, after consultation with the Restructuring Advisor and the DIP Lender, is not
satisfied with the number or terms of bids submitted by the Non-Binding APA Deadline, the Monitor may,
with the approval of the Restructuring Advisor and the DIP Lender, extend the Non-Binding APA Deadline
or cancel the Sale Process.
Binding APA Deadline
The Monitor, together with the assistance of the Restructuring Advisor, will take all reasonable
steps to negotiate and assist Phase 2 Qualified Bidder(s) in completing its unperformed due diligence, or
any other bid matters including any discussions or negotiations required to be completed with any
stakeholders in these CCAA Proceedings, with a view of submitting: (i) a further binding APA (a “Binding
APA”) on or before June 15, 2016 (the “Binding APA Deadline”), and (ii) a blackline outlining all
changes made to the APA, for consideration by the Monitor, and the Restructuring Advisor in consultation
with the DIP Lender. For greater certainty, a Binding APA shall:
(a)
be delivered to the Notice Parties prior to the Binding APA Deadline;
(b)
replace and supersede the Non-Binding APA submitted by a Phase 2 Qualified Bidder;
(c)
comply with all of the requirements set forth in respect of a Qualified APA;
(d)
include a letter stating that the Phase 2 Qualified Bidder’s offer is irrevocable and open
for acceptance until the Successful APA (as defined herein) is determined by the
Restructuring Advisor;
(e)
include written evidence of a firm, irrevocable commitment for financing or other evidence
of ability to consummate the proposed transaction, that will allow the Restructuring
Advisor, with the assistance of the Monitor to make a determination as to the Phase 2
Qualified Bidder’s financial and other capabilities to consummate the proposed
transaction;
(f)
not to be conditioned on: (i) the outcome of unperformed due diligence by the Phase 2
Qualified Bidder, and/or (ii) obtaining financing;
(g)
fully disclosure the identity of each entity that will be entering into the transaction or the
financing, or that is participating or benefiting from such bid;
(h)
provide a deposit in the amount of not less than 10% of the Purchase Price offered by the
Phase 2 Qualified Bidder (the “Deposit”);
(i)
include acknowledgments and representations of the Phase 2 Qualified Bidder that: (i) it
has had an opportunity to conduct any and all due diligence regarding the Assets and
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Becker prior to making its bid, (ii) it has relied solely upon its own independent review,
investigation and/or inspection of any documents and/or the Assets in making its bid, and
(iii) it did not rely upon any written or oral statements, representations, warranties, or
guarantees whatsoever, whether express, implied, statutory or otherwise, regarding the
Assets or Becker or the completeness of any information provided in connection
therewith, except as expressly stated in the definitive transaction agreement(s) signed by
the Restructuring Advisor;
(j)
the bid is received by the Binding APA Deadline; and
(k)
the bid contemplates closing the transaction set out therein on or before July 15, 2016
(the “Closing Date”).
The Monitor may determine, in consultation with the Restructuring Advisor and the DIP Lender,
whether to entertain bids for the Assets that do not conform to one or more of the requirements specified
herein and deem such bids to be a Binding APA; provided that the Monitor, in evaluating such bids, may
not waive substantial compliance with any of the above requirements without prior written consent of the
Restructuring Advisor and the DIP Lender.
Evaluation of Binding APA
A Binding APA will be valued based upon several factors including, without limitation, items such
as the Purchase Price and the net value provided by such bid, the claims likely to be created by such bid
in relation to other bids, the counterparties to such transactions, the proposed transaction documents,
other factors affecting the speed and certainty of the closing of the transaction, the value of the
transaction, the assets included or excluded from the bid, the transition services required from the Monitor
and the Restructuring Advisor post-closing (if any), any related restructuring costs, and the likelihood and
timing of consummating such transactions, each as determined by the Monitor, in consultation with the
Restructuring Advisor and the DIP Lender.
Each Phase 2 Qualified Bidder shall comply with all reasonable requests for additional
information by the Monitor or the Restructuring Advisor regarding the Phase 2 Qualified Bidder or the
Binding APA. Failure of a Phase 2 Qualified Bidder to comply with requests for additional information will
be a basis for the Monitor, in consultation with the Restructuring Advisor and DIP Lender, to reject a
Binding APA.
Selection of Successful APA
The Restructuring Advisor, in consultation with the Monitor and the DIP Lender: (i) will review
and evaluate each Binding APA. Each Binding APA may be negotiated among the Restructuring Advisor,
in consultation with the Monitor and the DIP Lender, and the applicable Phase 2 Qualified Bidder
submitting the Binding APA (the “Unconditional Bidder”), and may be amended, modified or varied to
improve such Binding APA as a result of such negotiations, (ii) identify the highest or otherwise best offer
for the Assets (the “Successful APA”, and the Unconditional Bidder making such Successful APA, the
“Successful Bidder”), or (iii) in the event no Successful Bidder is declared, reject each Binding APA and
may ask any Unconditional Bidder to resubmit a revised Binding APA. The determination of any
Successful APA by the Restructuring Advisor, after consultation with the Monitor and the DIP Lender,
shall be subject to approval by the Court.
Notwithstanding the foregoing, a Binding APA may not be withdrawn, modified or amended
without the written consent of the Restructuring Advisor and the Monitor prior to the Successful APA
being determined. Any such withdrawal, modification or amendment made without the written consent of
the Restructuring Advisor and the Monitor prior to the Successful APA being determined shall result in the
forfeiture of such Unconditional Bidder’s deposit as liquidated damages and not as a penalty.
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In the event an Unconditional Bidder is not selected as a Successful Bidder, the Deposit shall be
returned to the Unconditional Bidder as soon as reasonably practicable.
The Restructuring Advisor shall have no obligation to select a Successful APA, and it reserves
the right to reject any or all Binding APAs.
Sale Approval Motion Hearing
The motion for an order of the Court approving any Successful APA or any plan to give effect to
any Successful APA (the “Sale Approval Motion”) shall be sought and include, among other things, the
approval from the Court to consummate the Successful APA.
All of the Binding APAs other than the Successful APA, if any, shall be deemed rejected by the
Restructuring Advisor on and as of the date of closing of the transaction contemplated by the Successful
APA.
Reservation of Rights
The Restructuring Advisor, with the consent of the Monitor and after consultation with the DIP
Lender, may: (a) determine which Binding APA, if any, is the highest or otherwise best offer; (b) reject at
any time before the issuance and entry of an order approving a Binding APA, any bid that is
(i) inadequate or insufficient, (ii) not in conformity with the requirements of the Sale Process or any order
of the Court, or (iii) contrary to the best interests of Becker or its creditors; and (c) may modify the Sale
Process or impose additional terms and conditions on the sale of the Assets.
Miscellaneous
This Sale Process is solely for the benefit of the Monitor, the Restructuring Advisor and Becker
and nothing contained in the Sale Process Order or this Sale Process shall create any rights in any other
person or bidder (including without limitation rights as third party beneficiaries or otherwise) other than the
rights expressly granted to a Successful Bidder under the Sale Process Order.
Except as provided in the Sale Process Order and Sale Process, the Court shall retain jurisdiction
to hear and determine all matters arising from or relating to the implementation of the Sale Process Order
and the Sale Process.
Limitation of Liability
The Monitor, PwCCFI, the Restructuring Advisor and the DIP Lender shall not have any liability
whatsoever to any person or party, including without limitation any Potential Bidder, Becker, or any
creditor or other stakeholder, for any act or omission related to the process contemplated by this Sale
Process. By submitting a bid, each Potential Bidder shall be deemed to have agreed that it has no claim
against the Monitor, PwCCFI, the Restructuring Advisor or the DIP Lender for any reason whatsoever.
Schedule “A”
Non-Disclosure Agreement
PRIVATE & CONFIDENTIAL
►[Potential Bidder Organization Name and Address]
Dear Sirs:
Re:
Confidential Information with respect to 1721027 Ontario Inc., operating as Becker
Cogeneration Plant (the “Seller”)
In accordance with the terms of the Sale Process approved by the Ontario Superior Court of Justice
(Commercial List) on March 2, 2016 (the “Sale Process”) you have requested access to due diligence
and other materials relating to the business and assets (the “Assets”) of the Seller, such access to be
coordinated by PricewaterhouseCoopers Inc., in its capacity as the Court-appointed monitor in the
Companies’ Creditors Arrangement Act proceedings (the “CCAA Proceedings”) of the Seller (the
“Monitor”). You will treat confidentially any information the Monitor, KPMG Inc., providing the services of
Randy Benson among others, in its capacity as chief restructuring advisor to the Seller (the
“Restructuring Advisor”) or their representatives furnish to you in connection with the Assets (the
“Evaluation Material”), provided, however, that the term “Evaluation Material” does not include
information that: (a) was or becomes generally available to the public or to you on a non-confidential
basis through no fault or breach of this agreement on your part or on the part of any of your directors,
officers, employees or agents (including investment bankers, financing sources, accountants, and
attorneys) (all such directors, officers, employees or agents referred to collectively as,
“Representatives”); (b) was independently developed by you or your affiliates without reference to the
Evaluation Material; or (c) was provided to you by a third party not known to you, after due inquiry, to be
subject to confidentiality obligations.
You shall use the same degree of care as you use to protect your own confidential information of a similar
nature, but not less than reasonable care, to prevent the unauthorized use, dissemination or publication
of the Evaluation Material.
You agree that you will not use the Evaluation Material for any purpose other than evaluating your interest
in purchasing some or all of the Assets; provided, however, that you may disclose any Evaluation Material
to your Representatives who need to know such information for the purpose of evaluating the possible
purchase of the Assets (it being understood that you shall inform such Representatives of the confidential
nature of such information and that, by receiving such information, they agree to abide by the terms this
Agreement), provided that you will be responsible for any breach of the provisions of this Agreement by
any such Representatives.
Upon gaining access to the Evaluation Material, you will not contact any director, officer, employee or
stakeholder of the Sellers or its affiliates with respect to the Evaluation Material or any other matter
contemplated in this Agreement, outside of the ordinary course of business, until such time as you are
deemed a “Phase 2 Qualified Bidder” in accordance with the terms of the Sale Process.
In the event that you are required by applicable law or legal process or regulatory body or agency to
disclose any part of the Evaluation Material, you will, to the extent permitted by law, give the Monitor and
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the Restructuring Advisor prompt notice of such request so that the Monitor and the Restructuring Advisor
may seek an appropriate protective order. If in the absence of a protective order you are nonetheless
compelled to disclose any part of the Evaluation Material, you may disclose such information to (but only
to the extent necessary to comply with your legal obligations) without liability hereunder, provided,
however, that you give the Monitor and the Restructuring Advisor written notice of the information to be
disclosed as far in advance of its disclosure as is practicable and legally permitted. Upon the
Restructuring Advisor’s or the Monitor’s request, you will use your commercially reasonable efforts to
obtain assurances that confidential treatment will be accorded to such information.
Upon the Monitor’s or the Restructuring Advisor’s written request, you shall return promptly to the Monitor
or destroy all copies of the Evaluation Material and you shall provide promptly a written certificate to the
Monitor and the Restructuring Advisor confirming your compliance with this Agreement. Notwithstanding
the foregoing, on written notice to the Monitor and the Restructuring Advisor concurrently with the
provision of the aforementioned written certificate, you may retain a copy of the Evaluation Material to the
extent required in order to comply with regulatory and internal record retention requirements.
You agree that (a) the Restructuring Advisor and the Monitor reserve the right, in their reasonable
business judgment, and subject to competitive and other business considerations, to decline access to all
or part of the Evaluation Material, and (b) that the Restructuring Advisor and the Monitor reserve the right
to reject any and all offers for the Assets or to terminate discussions and negotiations with you at any time
all in accordance with the terms of the Sale Process. The exercise by the Restructuring Advisor or the
Monitor of these rights shall not affect the enforceability of any provision of this Agreement.
You acknowledge and agree that neither the Seller, Restructuring Advisor nor the Monitor nor their
representatives have made or make any representation or warranty as to the accuracy or completeness
of the Evaluation Material. You agree that neither the Sellers nor the Monitor nor their representatives
shall have any liability to you or any of your Representatives resulting from the use of, or reliance on, the
Evaluation Material. You agree that if you determine to engage in a transaction with the Sellers, such
determination will be based solely on the terms of any definitive written agreement covering that
transaction and on your own investigation, analysis and evaluation of the transaction.
You agree that damages may not be a sufficient remedy for any breach of this Agreement by you or your
Representatives, and that in addition to all other remedies, the Sellers shall be entitled to seek specific
performance, injunctive relief or other equitable relief as a remedy for any such breach.
You agree that this agreement, and any rights of the Sellers or Restructuring Advisor hereunder, shall
inure to the benefit of any party that enters into a transaction contemplated by the Sale Process.
The Restructuring Advisor and the Monitor may disclose the existence of this agreement, the identities of
the parties hereto and any other information in respect of this agreement, or a transaction proposed by
any party hereto, to the Notice Parties (as defined in the Sale Process) and, to the extent required in
connection with the CCAA Proceedings or applicable laws, to any other person.
This Agreement shall be governed by and construed in accordance with the laws of the Province of
Ontario and the federal laws of Canada applicable therein. This Agreement and the rights and obligations
of the parties will terminate two years from the date hereof.
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Please indicate your agreement with the foregoing by signing and returning one copy of this agreement
to:
PricewaterhouseCoopers Inc.
Court-appointed Monitor of Becker
18 York St., Suite 2600
Toronto, ON M5J 0B2
Attention: Michelle Pickett and Frederic Bouchard
e-mail: [email protected] / [email protected]
Yours very truly,
1721027 ONTARIO INC , operating as BECKER
COGENERATION PLANT, by its Chief
Restructuring Advisor
.
Per:
Name: Randy Benson
Title: Chief Restructuring Advisor
Confirmed and agreed to this
day of
►
[Potential Bidder Organization Name]
Per:
_____________________________
Name:
Title:
(I have the authority to bind the corporation)
, 2016.