The minority owners of Burlington, Nova Scotia, Canada-based recirculating aquaculture system (RAS) company Sustainable Blue have planned a stalking horse bid worth roughly CAD 30 million (USD 21.9 million, EUR 20.1 million) for the company as part of its restructuring process.
The Sustainable Blue minority shareholders that control 4595756 Nova Scotia Limited (459NSL) applied to the Supreme Court of Nova Scotia in Bankruptcy and Insolvency to place the company into receivership after a failure of its aquaculture systems in November 2023 resulted in the loss of 100,000 Atlantic salmon, or roughly 20 percent of ithe company's fish.
While Sustainable Blue CEO Kirk Havercroft told SeafoodSource in December 2023 his company was still bullish about its prospects, the mortality impacted the company’s mature salmon scheduled to be harvested between 28 November 2023 and 31 July 2024, leaving it with no product available to meet contracts.
As a result of the lack of revenue, minority shareholders Thane Stevens and Jim Lawley – who control 459NSL – loaned a total of CAD 2.3 million (USD 1.7 million, EUR 1.5 million) to Sustainable Blue to fill funding gaps. The loans, however, were not a “sustainable long-term solution,” per court filings, and liquidity issues led the shareholders to file for receivership under the newly created 459NSL, which had reached an agreement to acquire Sustainable Blue’s debt.
As a result of the filing, on 4 April 2024, the court appointed Deloitte Restructuring to oversee the restructuring process for Sustainable Group, comprised of TCAS Holding, Sustainable Fish Farming, Sustainable Blue, and TCAS IP.
Now, Deloitte said in court filings that it wants to put Sustainable Blue through a sales investment and solicitation process (SISP).
“The receiver has concluded that the SISP is the most viable way to maximize the realizable value of the assets of the debtors and allow their operations to continue as a going concern,” Deloitte wrote in court filings.
The process would see Sustainable Blue go through a bid process, with an auction proceeding so long as a qualified bidder other than 459NSL applies for an auction. The timeline put forward by Deloitte in its motion would see it solicit for non-binding expressions of interest until 21 June, with a Phase 2 bid deadline of 2 August. Then, an auction would take place on 7 August 2024 for the company.
The motion was heard in Nova Scotia Supreme Court by Justice Darlene Jamieson on 3 June, Nova Scotia Judiciary Director of Communications Andrew Preeper confirmed to SeafoodSource. He could not share the outcome of the hearing but said another hearing is scheduled for 20 June 2024.
The stalking horse purchase price put forward by Deloitte is the sum of senior secured debt owed by the debtors, all borrowings made by Deloitte, costs to “cure any assumed contracts,” and assumed liabilities, and to pay the fees owed to Deloitte for its role as receiver.
As part of its motion to start the sales process, Deloitte also requested the court increase its borrowing authority to CAD 6 million (USD 4.4 million, EUR 4 million), up from the previously authorized CAD 2.5 million (USD 1.8 million, EUR 1.6 million).
Deloitte said that it is entirely dependent on funding from 459NSL to maintain Sustainable Blue’s inventory of live fish and that funding isn’t enough to continue farming operations.
“Without increased borrowings, the receiver has no way to support such inventory through to maturity to harvest and eventual sale and would need to consider assigning the debtors into bankruptcy, as there would be no available liquidity to support their operation,” Deloitte wrote.
The additional funding will allow the company to continue maintaining the farm’s operations, which currently houses 550,000 live fish.
“Given that the debtors’ inventory represents live animals, it is necessary to support them through to maturity in order to prevent them from becoming a total loss,” Deloitte wrote.
Deloitte Restructuring has not responded to requests for comment from SeafoodSource.
