Cassiar Mining, put to rest by bankruptcy last year, has come back to haunt former owner Princeton Mining (TSE).
The trustee in bankruptcy of Cassiar (and subsidiary San Antonio Gold) served Princeton with a demand for payment of $6.3 million allegedly owing as an undischarged inter-company loan.
The trustee claims a January, 1992, transaction is a “reviewable transaction” under the Bankruptcy and Insolvency Act. If found to be “reviewable,” a transaction made within one year prior to bankruptcy can be reversed. Robert Watts, chief financial officer at Princeton, said the transaction in question is somewhat complicated and relates to a triangle of inter-company loans.
Following a company reorganization in 1989 in which Princeton became the publicly traded parent and Cassiar a wholly owned subsidiary (as opposed to the reverse, beforehand), San Antonio Gold owed its parent, Cassiar, about $7 million, Cassiar owed its parent, Princeton, about $9.3 million and — completing the circle — Princeton owed San Antonio $6.3 million. The transaction under review involved a cancellation of inter-company accounts to the extent of $6.3 million owed between each of the parties. Princeton originally sought court protection under the Companies’ Creditors Arrangement Act for Cassiar and San Antonio on Oct. 15, 1991. On Jan. 16, 1992, the Province of British Columbia elected not to support a reorganization plan for Cassiar which called for a further $13 million in government loans on top of a previous obligation to the government totaling more than $25 million.
Princeton completed the transaction in question on Jan. 23, 1992, and on Feb. 14, 1992, the government appointed a receiver to deal with Cassiar’s assets. Watts said the company’s legal council has advised that the cancellation of inter-company accounts is not a “reviewable transaction” and that any such claim could be successfully defended.
Princeton has instructed outside legal council to defend any legal action commenced with respect to the trustee’s demand.
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