Hefler Forest Products creditors to meet

Creditors for bankrupt Hefler Forest Products will meet for the first time Tuesday by conference call.

The bankruptcy of the Middle Sackville company, which has run a lumber mill just off Highway 101 that's been there for decades, occurred Feb. 11, according to a notice from Deloitte Restructing Inc. Deloitte was appointed as trustee Jan. 22.

According to a Deloitte prefiling report, Hefler was formed in March 2017 when Hawthorne Capital Inc. and Katalyst Wind Inc. incorporated RiverRoad Holdings Inc. to acquire the Hefler assets from a Companies' Creditors Arrangement Act proceeding. In September 2020, Hawthorne purchased Katalyst's equity interest in Riverroad and became the sole shareholder of Hefler.

Hefler operates a biomass power plant that generates and sells energy to Nova Scotia Power at predetermined rates under the Nova Scotia Community Feed-in Tariff program. Hefler has also operated a sawmill intermittently since acquiring the assets, the report states.

Since 2017, Hefler is said to have incurred operating losses of $8.6 million, resulting in negative earnings before interest, taxes, depreciation and amortization of $5.4 million, and has relied on capital injections from its shareholders and restructured terms from CIBC.

Management told Deloitte that the main factors hindering Hefler's performance were:

Biomass input prices being significantly in excess of what management had projected during its due diligence.

Biomass consumption rates significantly exceeded expectations.

Poor operating results at the sawmill caused by inefficient equipment, limited management experience and high input costs.

Annual repairs and maintenance significantly exceeded management's expectations.

Utility costs, specifically water consumption rates, exceeded expectations.

The report says Hefler employed 14, with the plant run under the supervision of a Class 1 power engineer.

Deloitte says it has been advised that in mid-january, the sole director of Hefler, C. Robert Gillis, resigned, along with the officers, Jason Weston and Candice Blaney. Since then, the plant has been left without any stewardship or funding to continue operations.

Hefler has about $6 million in assets and owes about $12 million. Deloitte said the cumulative indebtedness owing to CIBC is about $6.6 million.

Hefler has about $6 million in assets and owes about $12 million.