Court approves sale of company
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Trying times: Company’s future remains undecided.
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Employees hit hard by layoffs
Salmon Arm Observer
The day after 105 of the 330 workers at Coe Newnes McGehee were laid off, the BC Supreme Court granted an order allowing the company to be put up for sale.
Interim CEO David Bowra confirmed that Alvarez & Marsal, the court-appointed monitor under the Companies’ Creditors Arrangement Act, will oversee the sale process.
“The company’s plan is to be sold as a going concern. We want to keep as much of the business and value of the business intact pending a sale,” Bowra said. “I think several parties are interested in taking over the business and operating it as a going concern.”
He said a date for offers has been set toward the third week of June, although they can be entertained earlier, subject to court approval.
Asked if he thinks a buyer would simply purchase the company and then lay off all the workers, he said he thinks any prospective purchaser will disclose their intentions.
“We’re not just selling a bunch of metal, we’re selling knowledge, design, engineering – it’s worth a lot less without the people.”
However, the draft form of terms and conditions of sale filed with the monitor’s first report states that purchased property must be removed within 10 days after the closing date of the sale “unless the purchased property includes the premises at which the remaining purchased property is located.”
Asked how a buyer would operate the company in the current industry downturn, Bowra replied: “If we all believe there’s no future in the forest industry, then the question is valid. I think a lot of people believe the cycle will continue for the next year or two... Anyone going into the business is looking at it for the long haul, not the short haul. That’s why it’s possible to attract someone already in the industry, not necessarily a financial investor.”
He summed up: “My simple message is it will be a minimum of 30 days, more likely 60 days to have a clear sense of the business regarding its sale. In the meantime it will be business as usual as much as possible.”
Asked why employees won’t be getting the holiday and severance pay owed to them, Bowra replied: “The court has precluded the company from paying holiday and severance pay. At the time of the filing, all creditors’ (which includes laid-off employees) actions are stayed.”
However, an April 30th court order states that the petitioner – Coe Newnes McGehee Inc. – “shall be entitled, but not required, to pay the following expenses which may have been incurred prior to the filing date:
a) all outstanding wages, salaries, employee and pension benefits (including long and short term disability payments), vacation pay, bonuses and expenses (but excluding severance pay) payable before or after the filing date...”
Bowra said it’s unusual for severance to be paid under the circumstances.
“I can’t remember it ever being paid when a company seeks creditor protection.”
The order also sets priorities of charges paid. Employees are generally considered unsecured creditors, so come after the following charges and what’s owed to the lender, which was, as of April 21, $26 million.
First is the administration charge for the court-appointed monitor to a maximum of $500,000, second is a security to a maximum of $2 million to protect the company’s directors and officers from future claims, third is the Key Employee Retention Program – a potential bonus incentive to employ key people – and Unionized Employee Retention charges to a maximum of $200,000, and fourth is the customer deposit charge.
The company’s court-ordered protection from creditors expires May 28 unless the company requests that the court extends the time frame.
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