Validus Power Corp., the operator of a power plant in Northern Ontario, has been placed into receivership due to financial difficulties.
Validus Power Corp. was responsible for the operation of the power plant through an agreement with Macquarie Equipment Finance Ltd. In April 2022, Macquarie Equipment Finance Ltd. acquired the turbines, plant, and equipment from Iroquois Falls Power Corp. for $45 million, subsequently leasing them back to Validus Power Corp. for operation.
According to the lease agreement between Validus and Macquarie, monthly rent payments were to be made, and the agreement included provisions for the corporation to enter bankruptcy in the event of default.
As of the time the company was placed under interim receivership in August of this year, Macquarie Equipment Finance Ltd. was still owed more than $40 million. The reviewing judge stated that “events of default have clearly occurred.”
The judge cited multiple breaches of the agreement, including the failure to repay amounts when due, non-payment of rent, failure to remit HST and other taxes, breach of an agreement with a key customer, and failure to properly maintain financial records and insurance.
Efforts to sell the power plant’s assets have faced challenges due to the chaotic state of the business. The court decision noted that “there is no apparent liquidity in the property of the debtors, the books and records are in disarray, with the result that an accurate valuation is difficult if not impossible.”
Additionally, allegations were made regarding the misappropriation of funds from a bank account to which the company’s principals were mistakenly granted access (CIBC). The principals were also alleged to have failed to provide benefits and RRSP contributions to their unionized employees as per a collective bargaining agreement.
Macquarie Equipment Finance Ltd. made several attempts to assist Validus, including granting a four-month rent holiday in February, attempting to facilitate a sale, and covering the power plant’s debts totaling over $1.4 million.
In favor of Macquarie, the judge expressed concerns about the management of the power plant, stating that “there is disarray in the management of the (power plant) and also to the stability of the operations of the debtors.”
The judge noted that Macquarie had made arrangements with a licensed operator who could take control of the power plant.
As a result, the judge concluded that “the receiver should be appointed on the terms set out in the order agreed as to form and content (without, for the time being, the authority to commence a CCAA proceeding).”
Read the full decision here.