The Chronicle Herald (Provincial)
Future of Hefler mill in doubt
For many years, Hefler Forest Products, located adjacent to Highway 101 in Middle Sackville, has stood as a visible symbol of Nova Scotia's prosperous forest industry.
The family business was founded by Erastus Hefler in 1866. It was later operated by Harry Hefler, who was joined in the family company by his then 12-year-old son Royce, who would take over running the company in 1945, moving the operation to its current location.
It is hard to keep a family business going for many generations, and the Heflers were no exception. Royce Hefler died in 2014, and although the family worked hard to keep pace with technology — installing a biomass generator of electricity in 2015 — it was to no avail.
The company was taken out of the control of the Hefler family in 2017, when new ownership took over following a Companies' Creditors Arrangement Act proceeding. The act allows insolvent companies that owe more than $5 million to restructure their finances.
As a result of that proceeding, the business was acquired in March 2017 by Hawthorne Capital Inc., based in Bedford, and Katalyst Wind Inc. of Dartmouth, which formed a holding company, Riverroad Holdings Inc., which they owned on a 50-50 basis to operate the lumber mill and biomass plant.
As an aside, Hawthorne Capital is a wholly owned subsidiary of Thornridge Holdings Ltd. of Bedford, which is the family holding company of well-known Nova Scotia investor David Hennigar. Hennigar is the grandson of the late Roy Jodrey, the famed Nova Scotia industrialist.
On Sept. 28 last year, Hawthorne Capital acquired Katalyst's equity interest in Riverroad and therefore became the sole shareholder of Hefler, which is registered as the numbered company 3304051 Nova Scotia Ltd.
Hefler went bankrupt in January and Deloitte Restructuring Inc. was appointed trustee. The first conference call meeting of creditors was Tuesday, but the future status of the company is not known.
The knowledgeable people in charge of the file at Deloitte did not respond to numerous requests for information.
Hefler operated a 3.1 megawatt biomass power plant that generates and sells energy to Nova Scotia Power at predetermined rates under the Nova Scotia Community Feed-in Tariff program. A representative for NSP indicated in an email on Thursday that it is not known what will happen to the generator, but it will be determined as part of the insolvency process.
Hefler has also operated a sawmill since acquiring the assets, the report states. It has operated the sawmill at the facility only “intermittently,” according to Deloitte, since Riverroad acquired the assets in 2017.
Since then, Hefler has 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, the receiver reported.
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.
Management told Deloitte that the main factors hindering Hefler's performance were:
• Biomass consumption rates significantly exceeded expectations.
• Biomass input prices being significantly more than what management had projected.
• Poor operating results at the sawmill, caused by inefficient equipment, limited management experience and high input costs.
• Annual repairs and maintenance significantly exceeded expectations.
• Utility costs, specifically water consumption rates, were more than predicted.
Deloitte says it has been advised that in mid-january, the sole director of Hefler, Robert Gillis, president of Thornridge Holdings and CEO and chairman of Hawthorne Capital, had resigned, along with two other officers, Jason Weston, chief financial officer of Thornridge Holdings and Hawthorne Capital, and Candice Blaney, controller at Hawthorne Capital.