Saturday, December 13, 2008

Government did not want resort to go bankrupt

No such preference; Government did not want resort to go bankrupt: Marshall
GARY KEAN The Western Star

CORNER BROOK — Justice Minister Tom Marshall has taken issue with the parent company of Humber Valley Resort’s stance that it was the government’s “preference” for the operation to go bankrupt.

The Tory legislature member for Humber East, whose duties include monitoring developments at the beleaguered resort situated in his district, said government was not about to use the province’s resources to bail out the private business.

The Humber Valley Resort Corporation (HVRC), a subsidiary of parent company Newfound NV, terminated its protection from creditors one week ago today. That same day, the resort filed an assignment in bankruptcy.

This past Monday, chalet owners and other creditors were sent a letter from Stephen Bentley, Newfound’s group finance director, notifying them that bankruptcy has been filed for, and that Newfound, which had sunk about $46 million into the resort, is also now a creditor.
In the correspondence, Bentley reiterated Newfound’s stance that bankruptcy was not the resort corporation’s intention and its chances of avoiding such measures depended on support from the provincial government. The resort wanted government to help maintain direct flights to the United Kingdom, help a local, incorporated municipality to administer basic services such as snowclearing and garbage collection, and free up land the resort had been leasing until recently.

“Whilst initial discussions appeared to be fruitful, in recent weeks it has become clear through media reports and correspondence with the company that the government of Newfoundland would prefer that the resort goes into bankruptcy before they make a decision on their future involvement with HVRC,” wrote Bentley.

Marshall said the province still has not ruled out enhancing marketing effort towards helping fill charter flights, and the Department of Municipal Affairs will work with any municipality considering expanding its services to the resort, but was not going to invest any money directly in the resort.

Fair market value
When it came to the Crown land issue, though, he said there was no way the government was going to give that up without getting fair market value in return.

“Mr. Bentley said it was government’s preference they go bankrupt — we had no such preference,” Marshall said. “...Government’s relationship with the resort was as a landlord only. We had nothing to do with the fact they sought protection under the CCAA and we did not indicate to them in any way they should go bankrupt. That was a decision they made and had nothing to do with government.”

The minister said his 32 years of practising law has shown him that it is typical for businesses that go bankrupt to shift blame for the downfall.

“The research clearly indicates that the majority of businesses that fail, fail because of poor or incompetent management,” he said. “Any business, when it fails, will blame government, their lawyers or accountants. They will assign blame to many people when, in reality, the blame should be assigned to the person they see in the mirror.”

Now that bankruptcy has been filed for, the assets of the resort — including all real property, buildings, equipment and accounts receivable — have been assigned to the firm Ernst and Young, which was the court-appointed monitor of the resort’s activities during the creditor protection phase of its attempt to restructure.

“We are the trustee in bankruptcy until the first meeting of creditors, at which time the creditors will confirm us as trustee or substitute another in our place,” Mathew Harris, managing partner of Ernst and Young’s Atlantic Canada Office, told The Western Star via e-mail correspondence.

“After the meeting of creditors, the trustee will begin the process of liquidating assets — possibly by a tender sale.” That meeting of creditors and the trustee is scheduled to be held in St. John’s Jan. 7.“At that meeting, they (creditors) will elect inspectors to represent the general body of creditors,” said Harris. “The board of inspectors will give direction to the trustee in the administration of the estate.”

Harris could not speculate on how long the process of liquidating assets would take. The money generated from selling off resort assets would eventually be distributed among creditors in accordance with a scheme of priority set out in the federal Bankruptcy and Insolvency Act.
Harris said there are several hundred creditors involved, representing indebtedness totalling roughly $65 million. While Newfound NV is one of those creditors, it does not hold any special status.

It is possible Newfound NV could eventually buy the property back. Harris said the bankruptcy process would not give Newfound NV any particular advantage over any other entity interested in taking over the facility.

Western Star web article

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