In a final attempt to restructure its debt, Quinsam Coal filed for creditor protection in mid-May and suspended operations at its coal mine near Campbell River, B.C. As a result, 120 unionized workers were laid off.
The court has decided to allow Hillsborough to use a portion of its cash resources to repay Quinsam’s outstanding debt to the Toronto-Dominion Bank in return for an assignment of the bank’s security position.
In order to fund the resumption of mining operations on a reduced scale, Hillsborough will provide a limited line of credit on a secured basis, which will be margined on coal inventories and receivables. Quinsam recalled about 25 workers in early June to resume operations on a 2-shift basis. This was deemed sufficient to meet the demand from the company’s domestic customers.
The court also approved the resumption of interest payments by Quinsam to its principal lender, Northgate Exploration, which has a first charge on the assets of the mine (other than inventories).
“The court has given us until Aug. 31, 1999, to file a reorganization plan and further, until Sept. 30, to obtain the approvals we will need from shareholders and creditors,” says David Slater, president of Hillsborough and Quinsam. “Now that we are able to pay off the bank and resume mining operations, we can plan the long-term survival and profitability of both companies.”
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