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Lender Update
Project Name: PG Specialty Wood Products Ltd. ("PG Woods")
#1158 First Mortgage
March 19, 2001
Further to our letter of June 20, 2000 we are writing to update you on the status of the above noted mortgage.
Project Status
In our last letter to you with respect to PG Woods we indicated that the company had ceased operations and a receiver had been appointed with a mandate to sell the assets or the company and settle the claims in their order of priority.
The Equipment was appraised in July 2000 at between $323,300 and $416,450 including a value for the buildings of between $7,800 and $11,000. The land was appraised on June 27, 2000 at between $950,000 and $1,050,000. The receiver subsequently requested the land appraiser to include a value for the building and the revised appraisal for land and buildings as at July 31, 2000 came in at between $1,308,000 and $1,408,000. The land and building appraisal ignored a serious environmental issue with the lands. Ground water seepage from the neighbouring CN lands has contaminated the PG Woods' land.
The land, buildings and equipment were offered for sale during August 2000, with a viewing arranged for August 16 and offers to be received by August 28th. Approximately 40 tender packages were distributed and 19 parties attended the viewing. Six offers were received for the equipment ranging in value from a low of $30,000 to a high of $296,000 as a guaranteed minimum from an auction company. Two offers were received for the land and buildings, $200,000 and $400,000.
Final proceeds from sale of the equipment were $303,000 before deducting the costs of the receivership.
One of the offers for the land and buildings was negotiated up to $580,000 and the purchaser was prepared to go higher if an environmental indemnity could be obtained from CN as the cause of the contamination. CN refused to provide any indemnity and the costs to pursue through the courts was deemed to be prohibitive.
Sale of the land and buildings closed at the beginning of 2001. Property taxes including penalties and interest totaled $530,000 at closing and ranked in priority to the first mortgage lenders.
All assets of PG Woods have now been disposed of and there will be no recovery of funds for the first mortgage lenders from this source.
The Judicial Trustee is attempting to have an approximate $200,000 deposit returned to PG Woods. PG Woods funded the purchase of a term deposit to be held on behalf of the Ministry of Forestry in support of a timber license granted to a related company. If the Judicial Trustee is successful in having these funds returned, there may be a small amount available for distribution to the first mortgage lenders.
Lender Communications
We will continue to communicate directly with all lenders. However, we urge you to take advantage of the web site at http://www.eron-pwl.com for project specific updates as well as related court orders and other general information. We would encourage you to contact your Lender Lead, Erika Inacio at (604) 438-0485 for updates on the PG Woods project. (Please note the change in the telephone number from our letter of June 20, 2000.) If you need information on reclaiming tax on interest income in prior years, please call David Craig at (604) 713-6680.
Yours Truly,
Judicial Trustee
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