No. S078473 Vancouver Registry IN THE SUPREME COURT OF BRITISH COLUMBIA

No. S078473
Vancouver Registry
IN THE SUPREME COURT OF BRITISH COLUMBIA
IN THE MATTER OF THE COMPANIES’ CREDITORS ARRANGEMENT ACT
R.S.C. 1985, c. C-36
AND
IN THE MATTER OF THE BUSINESS CORPORATIONS ACT, S.B.C. 2002, c.57
AND
IN THE MATTER OF TED LEROY TRUCKING LTD. and 383838 B.C. LTD.
(Collectively referred to as “TLT” or the “Company”)
MONITOR’S EIGHTH REPORT TO COURT
AUGUST 18, 2008
TED LEROY TRUCKING LTD. et al
MONITOR’S EIGHTH REPORT TO COURT
AUGUST 18, 2008
TABLE OF CONTENTS
1
INTRODUCTION..........................................................................................................1
2
BACKGROUND ON THE PROCEEDINGS .............................................................1
3
CURRENT CIRCUMSTANCES – MATERIAL ADVERSE CHANGE.................3
4
IMPACT OF CURRENT CIRCUMSTANCES..........................................................5
5
PROPOSED RESOLUTION TO CURRENT CIRCUMSTANCES ........................5
6
CONCLUSION AND RECOMMENDATION OF THE MONITOR ......................7
APPENDIX
A.
Actual Cash-Flow Statement for the period December 14, 2007 to August 15, 2008
TED LEROY TRUCKING LTD. et al
MONITOR’S EIGHTH REPORT TO COURT
AUGUST 18, 2008
1
2
INTRODUCTION
1.1
This represents the Monitor’s Eighth Report to the Court with respect to the
Company’s filing under the Companies’ Creditors Arrangement Act (the
“CCAA”).
1.2
This report has been prepared to update the Court regarding a material change that
has occurred subsequent to the Monitor’s previous reporting.
1.3
On June 13, 2008 the Monitor issued a report to update the Court on a material
change that had occurred and the Company’s proposed resolution. Subsequent to
that date events have occurred that materially differ from the operational and
financial expectations previously outlined to the Court. These events, their
implications, and the Company’s proposed resolution are outlined in this report.
BACKGROUND ON THE PROCEEDINGS
2.1
The Monitor has previously filed seven reports with the Court with respect to the
CCAA proceedings. The most recent report was dated June 13, 2008.
2.2
Background details and information relating to the Company and the filing are set
out in the Petition filed on December 13, 2007. The Initial Order under the CCAA
was made on December 14, 2007. Under the Initial Order, the initial stay of
proceedings was granted until January 13, 2008 and PricewaterhouseCoopers Inc.
(“PwC”) was appointed as Monitor.
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TED LEROY TRUCKING LTD. et al
MONITOR’S EIGHTH REPORT TO COURT
AUGUST 18, 2008
2.3
On December 28, 2007, the Company made an application to Court to deal with
an urgent matter that critically affected its cash-flow. The need for this application
was driven by the threat of set-off from TimberWest, Island Timberlands and
Western Forest Products (collectively referred to as the “Customers”) relating to
amounts owing by TLT (i.e. pre-filing amounts owing to the Workers’
Compensation Board, sub-contractors, and other pre-filing advances) that created
a potential exposure to the Customers. The requested order was made to provide a
charge in favour of the Customers in the amount of $2.1 million. The quantum of
this Set-Off charge was based on the forecast payments to be made by the
Customers between the period of December 28, 2007 to January 11, 2008.This
charge is referred to as the “Set-Off Charge”.
2.4
On January 11, 2008, the Company was granted an extension of the stay of
proceedings until February 15, 2008.
2.5
On February 15, 2008, the Company was granted an extension of the stay of
proceedings until March 20, 2008, in order to permit the Company to pursue
refinancing opportunities.
2.6
On February 15, 2008, the Set-Off Charge order granted on December 28, 2007
was amended, reducing the aggregate amount to $1.02 million from $2.1 million,
and specifying the amounts in favour of each of the Customers.
2.7
On March 20, 2008, the Company was granted an extension of the stay of
proceedings until March 29, 2008.
2.8
On March 28, 2008, the Company was granted an extension of the stay of
proceedings until April 8, 2008.
2.9
On April 7, 2008, the Company was granted an extension of the stay of
proceedings until November 28, 2008.
2.10
On April 29, 2008, the Company was granted authorization by the Court to remit
specified payments to its secured creditors, including up to $5 million to Century
Services Inc. (“Century”), and to resume payments on equipment under capital
lease.
2
TED LEROY TRUCKING LTD. et al
MONITOR’S EIGHTH REPORT TO COURT
AUGUST 18, 2008
3
2.11
On June 13, 2008, the Monitor filed its 7th report. This report discussed a number
of factors that had resulted in a significant deterioration in the Company’s
financial performance relative to plan, and identified a number of changes to the
Company’s operations and organizational structure which were expected to
address the deterioration.
2.12
The Monitor has established a website at www.pwc.com/car-tedleroy where all
materials filed with the Court by TLT and the Monitor, as well as any Orders
granted by the Court, are made available in electronic form to creditors and other
interested parties.
CURRENT CIRCUMSTANCES – MATERIAL ADVERSE CHANGE
There have been a number of events that have occurred subsequent to the Monitor filing
its Seventh Report dated June 13, 2008. The most significant of these are outlined below.
The following sections represent the key activities for each customer group, since the
release of the Monitor’s 7th report to the Court.
Overall:
3.1
TLT Operations through May and June 2008 demonstrated unfavourable financial
performance. Significant negative cash flow results were experienced in
Cowichan (ITL) and Bonanza (TW) operations, and were unfavourable compared
to the plan.
3.2
With a curtailment of all operations (receipts) and the above mentioned
significant losses, TLT has been operating in a cash constrained mode. TLT has
not been able to make some payments including default on paying interest on the
Century Loan (last payment was April 2008). TLT has had to defer many other
payments on a regular basis (including payments to some sub-contractors, Union
dues, and Pension contributions). Cash Flow remains extremely tight, with
operational payments consuming a majority of the financial resources each week.
3
TED LEROY TRUCKING LTD. et al
MONITOR’S EIGHTH REPORT TO COURT
AUGUST 18, 2008
3.3
The company has not been paying some professional fees payable. The balance
of professional fees payable, at the time of this report, is in excess of $300,000,
exceeding the established $250,000 admin charge.
Western Forest Products:
3.4
Western Forest Products (“WFP”), restarted TLT’s North Island operations on
June 24, 2008 as expected. However, this was at a reduced production volume
(down approximately 25% relative to the previously indicated volume).
3.5
WFP North Island operations were reduced to a four week period, and were shut
down by WFP for market conditions from July 17 until early September 2008.
Island Timberlands:
3.6
In July, 2008, a negotiated settlement was arrived between TLT and Island
Timberlands (ITL), that included an arrangement to orderly clean-up both logging
and road work in progress before the August weather shut down.
3.7
This orderly clean up is almost complete.
3.8
Some TLT Equipment used on the ITL sites is in the process of being re-located
to Chemainus for refurbishment and sale.
TimberWest:
3.9
On July 23, 2008, all TimberWest operations were suspended.
3.10
A settlement in principle was achieved on August 5, 2008 between TW and the
company.
3.11
The “TW – company” settlement is inclusive of:
3.11.1 Mutual releases of all past claims;
3.11.2 Loan Re-payment;
4
TED LEROY TRUCKING LTD. et al
MONITOR’S EIGHTH REPORT TO COURT
AUGUST 18, 2008
3.11.3 Bendickson Agreement;
3.11.4 Work-in-progress, wind-down of some of the operations;
3.11.5 Cash payment from TW to TLT for items above;
3.11.6 Sale of Johnstone Strait Bill 13; and
3.11.7 Release of Set-off Protection provided by the Court ($750,000).
4
5
IMPACT OF CURRENT CIRCUMSTANCES
4.1
The Company’s Actual cash-flow statement for the period December14, 2007 to
August 15, 2008 is attached as Appendix A.
4.2
The Set Off Charge provided by the Court for TimberWest is still $750,000. It
has been agreed by TimberWest that the $750,000 can be eliminated as part of the
TimberWest settlement; thereby reducing the Set-Off Charge for the company to
$270,000 ($120,000 for WFP and $150,000 for ITL).
PROPOSED RESOLUTION TO CURRENT CIRCUMSTANCES
5.1
The Monitor has reviewed and assessed the current circumstances with the
Company.
5.2
The Company is currently executing a ‘Debtor in Possession’ wind down plan
that will effectively terminate or sell off all TLT operations.
5.3
The wind-down plan consists of the following key elements:
5.3.1
Complete legal settlement between TW and the company.
5.3.2
No further operations at North Island (Western Forest Products) where
harvesting and road contracts are being marketed.
5.3.3
The disposition of the ITL contracts has not yet been determined.
5
TED LEROY TRUCKING LTD. et al
MONITOR’S EIGHTH REPORT TO COURT
AUGUST 18, 2008
5.3.4
Some equipment from all operations has been secured and moved, or are
currently being moved, or are being prepared for the move to Chemainus
for Refurbishment.
5.3.5
Once the equipment reaches Chemainus, any pre-identified refurbishment
and repairs to equipment will be completed, before moving to the Auction
site (also in Chemainus).
5.3.6
A proposal has been provided by Ritchie Brothers Auctioneers to the
company, which if accepted, would see the auction of most of the
equipment, and parts. The auction has been scheduled for
September 22, 2008;
5.3.7
The company is currently negotiating outside of the Ritchie Brothers
Auctioneers proposal the sale of some equipment:
5.3.7.1 Sale of Shoal Island and Race Point Equipment; and
5.3.7.2 Sale of 2 Floating Camps; and
5.3.8
The WFP Bill 13 contracts have had prospectus’ developed, and have been
listed for sale with the Truck Loggers Association. Strategies that are
being employed, or may be employed in the future include:
5.3.8.1 Approach potential buyers on an individual-basis;
5.3.9
Colliers has been engaged to sell the head-office and Chemainus shop
property. A number of local and out-of-town investors and prospective
buyers have visited the property, and/or have reviewed the prospectus.
5.3.10 The number of staff with the company has been reduced, with further
reductions taking place through August/September, as equipment relocation and refurbishment activities come to completion.
6
TED LEROY TRUCKING LTD. et al
MONITOR’S EIGHTH REPORT TO COURT
AUGUST 18, 2008
5.4
6
To mitigate any cash short-falls, the following two potential agreements have
been discussed, but are not final (at the point of this report being written):
5.4.1
Ritchie Brothers are to provide up-front cash to the Company to be
utilized to refurbish equipment or support the movement of equipment that
will be available for Auction. Ritchie Brothers will deduct this from their
payment of the Guarantee to the company; and
5.4.2
Century Services Inc has indicated that it will provide any remaining
shortfall in cash to the company. This is projected at an upper value of
$550,000.
CONCLUSION AND RECOMMENDATION OF THE MONITOR
6.1
The Company (TLT) is no longer a viable operation. Full liquidation of the
company has been agreed to by the company and Century Services Inc, and the
plan to achieve this is currently being implemented.
6.2
Given finalization of the agreement between TW and the company, it is
recommended that the $750,000 Set Off Charge for TW be eliminated.
6.3
The Monitor has reviewed and assessed the various components of the liquidation
process which has been agreed to between the Company and Century. In the
course of its review, the Monitor was supplied, by the Company, with
documentation and particulars of the various elements of the liquidation plan.
6.4
Auction Agreement
6.4.1
The Monitor is satisfied that the Auction Agreement is a reasonable
process for disposition of logging and other equipment and that it is an
expeditious means of obtaining fair market value for the assets concerned.
The Monitor notes that the auctioneer is Ritchie Brothers Auctioneers, a
well-known and reputable firm with extensive experience and expertise.
The Monitor also notes that there is a Guaranteed Minimum, (which is
being kept confidential but which has been reviewed by the Monitor) with
a potential up-side, depending on the degree of success of the auction.
7
TED LEROY TRUCKING LTD. et al
MONITOR’S EIGHTH REPORT TO COURT
AUGUST 18, 2008
6.5
The Land Sale
6.5.1
6.6
The Shoal Island and Race Point Equipment Sale
6.6.1
6.7
The Monitor has reviewed the elements of the Shoal Island and Race Point
Equipment Sale and is satisfied that the price being obtained is fair and
reasonable and is consistent with fair market value for that specific group
of assets, based on circumstances and present market conditions, and
based on an assessment of value by Ritchie Brothers and Century.
TimberWest Agreement
6.7.1
6.8
The head office land and buildings have been offered for sale in a public
market by way of a listing with Colliers. The Monitor is satisfied that this
is a fair and reasonable mechanism for obtaining fair market value for the
head office land and buildings. Colliers is a well-known and reputable
firm with extensive experience and expertise.
The Monitor has reviewed the terms of the overall settlement with
TimberWest, including the transfer to TimberWest of one of the Bill 13
Contracts. The Monitor is satisfied that the provisions of the TimberWest
Agreement are reasonable and are advantageous to the creditors and that
the TimberWest Agreement is a beneficial means of settling the various
disputes which existed between TimberWest and the Company.
Bill 13 Sales
6.8.1
The Monitor has reviewed the process undertaken for the sale of the two
remaining WFP Bill 13 Contracts (the third one to be transferred to
TimberWest in accordance with the TimberWest Agreement) and is
satisfied that the process being undertaken is reasonable and likely to
realize a price at fair market value for these Bill 13 Contracts.
8
TED LEROY TRUCKING LTD. et al
MONITOR’S EIGHTH REPORT TO COURT
AUGUST 18, 2008
6.9
Overall Liquidation Plan
6.9.1
6.10
The Monitor, having examined the various elements of the Liquidation
Plan, is of the view that the approach being taken by the Company,
working together with Century and with Century’s agreement, is a
reasonable and prudent process for maximizing recovery within a
reasonable period of time.
Century
6.10.1 The Monitor has discussed with Century all aspects of the Liquidation
Plan and the Court Application set for August 19. The Monitor has been
advised by Century that they are in agreement with all aspects of the
liquidation and with the matters set out in the Notice of Motion including
various payments which need to be made, and the prices which have been
negotiated for various categories of assets.
6.11
Monitor’s Overall Position and Recommendation
6.11.1 The Monitor is supportive of the approach the Company is taking and
what it is trying to achieve. The Monitor also understands and recognizes
that because of the sensitivity of certain numbers involved, and because a
part of the liquidation is based on future events (the auction in September,
and the ongoing attempts to sell the real estate and the Bill 13 Contracts),
it would be highly prejudicial to the process to disclose such numbers, nor
is it possible to place the numbers into the various cash flow forecasts.
Notwithstanding this non-disclosure, all of the numbers have been
provided to the Monitor and the Monitor is satisfied with them, as is
Century.
9
TED LEROY TRUCKING LTD. et al
MONITOR’S EIGHTH REPORT TO COURT
AUGUST 18, 2008
6.12
Stay of Bankruptcy Proceeding
6.12.1 With respect to the Company’s motion that the Company’s Bankruptcy
Proceedings be stayed, the Monitor recognizes the need for a stay and
supports such an approach, given that it is the Monitor’s view that there is
potentially significant value in the Bill 13 Contracts and without a stay of
the Bankruptcy Proceeding, the Bill 13 Contracts will be lost and no value
could thereafter be realized for the benefit of the creditors.
6.13
Trustee in Bankruptcy and Ongoing Monitoring
6.13.1 PricewaterhouseCoopers Inc. is prepared to act as Trustee in Bankruptcy
of the Company and is also prepared to monitor the liquidation process, on
an ongoing basis, as directed by the Court.
This report is respectfully submitted this 18th day of August 2008.
PricewaterhouseCoopers Inc.
Court Appointed Monitor of
Ted LeRoy Trucking Ltd.; and
383838 B.C. Ltd.
Craig G. Bushell
Senior Vice President
W:\FASData\T\Ted LeRoy Trucking Ltd\CCAA\Reports\8th Report\Monitor's 8th Report to Court.doc
10
APPENDIX A
Actual Cash-Flow Statement for the period
December 14, 2007 to August 15, 2008
Appendix A
Appendix A -PwC Cashflow
Actuals to August 15, 2008
Ted LeRoy Trucking
14-Dec to
4-Jan
Actual
General Account
Receipts
Accounts Receivable Collections
Insurance Proceeds
Net From Sale of Surplus Equipment
Other (including refunds)
Total Receipts
Week Ending
11-Jan
Actual
18-Jan
Actual
1,667
249,037
690,902
213,910
354,233
34,072
106,066
120,712
37,179
14,280
26,885
22,014
41,488
15-Feb
Actual
22-Feb
Actual
29-Feb
Actual
7-Mar
Actual
14-Mar
Actual
21-Mar
Actual
28-Mar
Actual
4-Apr
Actual
11-Apr
Actual
18-Apr
Actual
25-Apr
Actual
2-May
Actual
192,941
12,356
205,297
1,059,070
-
411,826
-
1,053,005
-
635,980
-
908,554
-
510,913
-
590,824
-
706,894
-
567,185
-
434,631
-
1,193,693
-
90,280
1,075,214
1,075,214
1,059,070
11,200
423,026
1,053,005
635,980
40,335
948,889
510,913
15,303
606,127
706,894
6,730
573,915
434,631
1,193,693
131,591
75,306
224,182
176,166
187,253
167,179
233,840
113,966
252,611
263,040
287,794
99,260
364,368
81,083
190,574
104,570
259,770
7,316
2,944
17,656
84,698
19,972
28,631
10,000
982
-
35,587
111,527
21,791
78,617
6,130
-
11,587
42,690
14,429
106,457
15,108
37
60,021
40,000
6,397
2,711
10,765
74,405
10,436
42,000
149,639
40,381
13,588
180,358
12,178
256,635
115,976
26,765
2,301
-
44,432
71,866
79,326
45,366
36,259
87,441
10
-
49,698
133,256
103,828
177,629
692
60,602
63,712
9,491
2,711
11,856
57,026
86,488
219,516
14,545
8,349
11,584
19,036
52,993
117,388
17,978
210,606
125,853
39,742
134,050
3,448
40,568
156,729
139,448
6,571
146,458
45,499
-
58,649
52,590
8,181
171,867
692
26,242
2,833
40
2,711
168,419
28,895
168,088
14,545
6,391
-
11,858
54,920
151,907
79,071
26,221
46,487
631
28,039
10,019
140,389
79,600
108,355
37,117
729
-
13,930
48,188
172,387
4,349
179,384
692
14,958
68,167
260
2,711
123,488
70,969
174,084
4,958
1,664
-
156,591
14,545
344,654
20,767
26,461
1,251
24,962
1,661,741
303,790
328,958
523,618
81,105
584,897
75,000
870,054
8,689
540,568
835,459
112,841
655,207
995,237
757,745
611,599
485,598
129,545
893,047
457,292
695,600
479,733
849,001
73,912
509,682
454,929
216,251
422,231
284,104
489,264
153,993
377,604
145,423
203,191
81,426
418,716
444,031
157,111
406,713
285,028
239,926
Total Cash Inflow (Outflow)
435,770
(54,753)
(238,678)
205,979
(138,126)
205,160
(335,271)
223,611
(232,181)
57,768
(121,765)
337,290
25,315
(286,920)
249,602
(121,685)
(45,102)
344,692
Closing Bank Account Balance
509,682
454,929
216,251
422,231
284,104
489,264
153,993
377,604
145,423
203,191
81,426
418,716
444,031
157,111
406,713
285,028
239,926
584,618
Opening Bank Account Balance
90,280
-
8-Feb
Actual
446,771
446,771
Vacation Pay2
Source Deductions
WCB - Post-filing
Sub-Contractors
Operations Related
Rental Equipment
Non-RBC Capital Leases
RBC/Century Interest
Consultants - Management
Professional Fees
Administrative
Insurance
Preparation - Auction
GST
PST
Refinancing Costs
Payments to Secured Creditors
Total Disbursements
247,370
-
1-Feb
Actual
729,597
729,597
Disbursements
Salaries, Wages & benefits
2,089,717
7,794
2,097,511
25-Jan
Actual
Page 1 of 2
Appendix A
Appendix A -PwC Cashflow
Actuals to August 15, 2008
Ted LeRoy Trucking
Week Ending
9-May
Actual
16-May
Actual
23-May
Actual
30-May
Actual
6-Jun
Actual
13-Jun
Actual
20-Jun
Actual
27-Jun
Actual
4-Jul
Actual
11-Jul
Actual
18-Jul
Actual
25-Jul
Actual
1-Aug
Actual
8-Aug
Actual
15-Aug
Actual
General Account
Receipts
Accounts Receivable Collections
Insurance Proceeds
Net From Sale of Surplus Equipment
Other (including refunds)
Total Receipts
493,783
-
1,110,805
-
309,686
-
549,321
-
523,718
-
1,070,830
178,008
715,180
487,818
936,124
593,899
312,893
8,339
879,547
27,678
35,814
529,597
1,110,805
309,686
549,321
523,718
68,178
1,139,008
5,612
183,620
88,882
804,062
60,354
548,172
39,813
975,937
15,235
609,134
5,452
318,345
8,339
38,564
918,111
77,439
105,117
Disbursements
Salaries, Wages & benefits
308,723
280,819
81,068
226,590
152,229
347,655
102,620
214,715
77,804
196,005
196,740
92,393
47,132
209,674
218,178
42,878
329,653
121,893
44,079
2,140
-
15,000
171,261
177,506
692
11,090
18,431
50,226
2,575
-
141,959
156,120
110,474
64,684
287
2,711
218,435
142,004
7,455
21,202
16
-
194,548
108,630
16,255
1,374
13,970
39,717
239,309
168,875
78,094
9,933
9,152
34
-
135,821
173,257
7,782
85
-
251,695
28,043
232,489
153,836
73,422
19,256
57,478
63,329
912,695
7,956
65,010
800,566
557,303
76,910
2,520
695,132
487,006
892,769
68,178
487,743
943,017
310,726
841,678
722,081
584,618
201,520
511,759
264,142
118,331
155,043
401,282
97,159
(41,795)
195,651
(383,098)
310,239
(247,617)
(145,811)
36,712
246,239
(304,123)
(138,955)
237,446
201,520
511,759
264,142
118,331
155,043
401,282
97,159
(41,795)
195,651
Vacation Pay2
Source Deductions
WCB - Post-filing
Sub-Contractors
Operations Related
Rental Equipment
Non-RBC Capital Leases
RBC/Century Interest
Consultants - Management
Professional Fees
Administrative
Insurance
Preparation - Auction
GST
PST
Refinancing Costs
Payments to Secured Creditors
Total Disbursements
Opening Bank Account Balance
Total Cash Inflow (Outflow)
Closing Bank Account Balance
146,875
14,545
11,090
132,964
54,269
35,405
15,000
16,255
286,251
246,783
10,781
43,533
33
108,297
138,476
80,901
177,979
17,332
46,905
20,000
312
12,986
684
1,835
521
33,548
58,984
5,342
44,200
45,897
1,021
121,267
20,439
-
68,111
42,335
7,386
55,924
55,633
212
7,946
34
2,000
369
12,871
315
31,447
281,385
202,393
611,591
391,281
329,910
215,491
252,451
58,397
364,917
134,259
(112,947)
36,960
(194,054)
306,520
(286,164)
329,910
216,963
252,451
58,397
364,917
78,753
Page 2 of 2