The province is opposing a deal that Northern Pulp claims would allow it to continue paying severance to its laid off employees, its share of the cost of Boat Harbour’s shutdown and cleanup, safely idle its kraft pulp mill and work toward an environmental approval for a new effluent treatment plant.
The deal is in the form of $50 million in interim financing being offered by Northern Pulp’s parent companies, Paper Excellence Canada and Pacific Harbor North American Resources Ltd.
Without access to the loan, Northern Pulp claims that it will run out of money in early August.
But the money comes with strings attached.
It would be paid out in installments that are advances on the following milestones being reached reached by 2022:
An environmental approval to build a replacement effluent treatment plant.
An agreement with the province to help fund its design and construction.
A court decision or negotiated settlement with the province paying lost profits and damages associated with the idling of the kraft pulp mill.
The province isn’t commenting on the proposed interim financing deal or its attempts to block it as the matter is part of creditor protection proceedings in British Columbia.
The Nova Scotian taxpayer is Northern Pulp’s largest secured creditor, holding just over $86 million in secured loans to the five companies associated with the mill.
The companies' names are 157863 B.C. Ltd, Northern Resources Nova Scotia Corp., Northern Pulp Nova Scotia Corporation, Northern Timber Nova Scotia Corporation, 325327 Nova Scotia Ltd.,3243722 Nova Scotia Ltd and Northern Pulp NS GP ULC.
All were placed under creditor protection last month.
Parent company Paper Excellence holds $29,855 in secured loans and $133,527,616 in unsecured loans.
The companies owe $13.2 million to the 280 employees laid off earlier this year in the form of severance ($7.12 million) and to over 200 forestry contractors, landowners and service providers to the mill.
The interim financing agreement would put Paper Excellence back at the head of the line to cash in on Northern Pulp’s major asset – nearly 200,000 hectares of woodland that the province lent it the money to buy ($65 million of which is outstanding) in 2010 – if the company goes bankrupt.
Not meeting the terms of the interim financing agreement would also allow Paper Excellence to force that bankruptcy.
The physical mill itself, according to Northern Pulp’s filings, was viewed as a major environmental liability at every other door they went to hat in hand for financing.
If Northern Pulp runs out of money, cleaning it up would likely land at the feet of the taxpayer (who is already paying the over $217 million estimated cost of cleaning up Boat Harbour).
“The petitioners have canvassed the market and sought interim financing proposals from a number of potential alternative lenders,” reads an affidavit filed by mill manager Bruce Chapman.
“No person, other than the (Northern Pulp’s parent companies), was interested in providing funding to (Northern Pulp).”
On Friday Northern Pulp will ask the British Columbia Supreme Court to overrule Nova Scotia’s opposition and sign the interim financing agreement. It is also seeking the extension of creditor protection to Dec. 31, permission to continue paying severance to the 280 people it laid off earlier this year and the salaries of the few dozen who remain.
“In effect, (Northern Pulp’s) path forward is opposed by the province, whose initial decision to pass the (Boat Harbour Act), and subsequent decision to disregard multiple unanticipated issues with the completion of the replacement (effluent treatment facility) and not to extend the January 31, 2020 closure deadline (for the Boat Harbour effluent treatment facility), has by and large required the petitioners to make the current CCAA filing,” reads Chapman's affidavit.
If the province succeeds in blocking the financing agreement, the taxpayer will be on the hook for lost profits and damages.
“(Northern Pulp) believe(s) that a re-start of mill operations affords the province the best opportunity to recover on its claims; absent that occurring, the petitioners will likely be forced to engage in costly and lengthy litigation,” reads the affidavit of Chapman, the mill manager.