Financially troubled land conservation organization TLC The Land Conservancy of British Columbia (“TLC”) recently took a significant step forward in its restructuring efforts under the provisions of the Companies’ Creditors Arrangement Act (the “CCAA”). With the overwhelming support of its creditors, both secured and unsecured, TLC brought forward for approval of the British Columbia Supreme Court a plan of compromise and arrangement (the “Plan”) at a hearing on April 2, 2015. The Court approved the Plan, with reasons for judgment to follow. The Court’s reasons were released on April 27, 2015, and they provide an occasion to recap the proceedings, and to assess the potential implications as TLC moves forward with implementing the Plan. The reasons of the Court are reported at TLC The Land Conservancy of British Columbia (Re), 2015 B.C.S.C. 656.
TLC initially sought and received protection from its creditors under the CCAA in October, 2013. At that time, it had accumulated more than $7.5 Million in debt, and its cash flows were inadequate to meet those obligations. The story of how TLC found itself in that position is a long one, but the Court manages to summarize it quite neatly. After describing TLC’s various means of obtaining funding for the acquisition and protection of properties, the Court went on to state, at paragraph 10 of the decision:
“The CCAA filing was necessitated when TLC found itself without adequate funding for its activities. To put it bluntly, TLC’s desire to protect these properties appears to have overshadowed the need to see that funding was secured to do so.”
Seeking to avoid a disastrous bankruptcy and liquidation, TLC opted to pursue restructuring as a going concern under the CCAA. What followed was a painstaking process that took place over a period of 19 months, featuring numerous trips back to Court, including some contentious litigation over a property in West Vancouver known as the “Binning House” which made its way to the British Columbia Court of Appeal.
While stakeholders were supportive of TLC in its efforts to restructure, a major and consistent concern amongst those stakeholders was to ensure that such restructuring was balanced with the need to preserve the properties held by TLC. TLC itself consistently confirmed the need for such balance, although this apparent alignment in priorities did not prevent conflict from occurring. One of the biggest challenges in the restructuring process has been the fact that each property held by TLC is in many respects unique, not only in its ecological or heritage characteristics, but also in terms of its legal circumstances.
Despite the many challenges, TLC was able to come up with a plan that aims to see all of its debts paid within 18 months following approval of the Plan. There remains a significant amount of uncertainty about whether events will unfold as anticipated in the Plan, and the spectre of bankruptcy and liquidation will continue to lurk until such time as the Plan has come to fruition and TLC is solidly back on its feet; however, the approval of the Plan by creditors and by the Court marks a significant milestone and offers reason to hope that TLC will succeed, a result that would benefit the many stakeholders involved as well as the land conservancy movement generally.
Highlights of the Plan include the sale by TLC of a handful of properties that are expected to generate several million dollars in revenue. Also, TLC will sell 28 ecologically sensitive properties pursuant to an agreement with the Nature Conservancy of Canada and the Nature Trust of British Columbia, ensuring their continued preservation. Certain other properties, described by the Court as “impeded properties” are subject to significant restrictions on TLC’s ability to dispose of them. For the most part, these impeded properties will be dealt with by TLC at a later date, should appropriate arrangements become possible, but the Court noted that some of those properties have been resolved by agreements that will see them transferred to the regional districts where they are located.
The Court drew specific attention to the involvement of local governments as stakeholders throughout the restructuring process, and moving forward, at paragraph 66 of the decision:
“Further, although technically creditors of TLC (regarding property taxes), many local government authorities, such as the City of Victoria, the Capital Regional District, the Cowichan Valley Regional District and the District of Tofino, remain involved in ensuring the protection and preservation of important ecological, heritage and cultural properties within their communities for the benefit of the public.”
Although the Plan approved by the Court provides the blueprint for TLC to move forward into the future, the Court has not yet relinquished all control over TLC’s activities. TLC will need to continue to seek the Court’s approval for the sale or transfer of properties in certain circumstances, and the 18 month deadline for implementation of the Plan sets a definite expectation that the Court will re-evaluate the Plan in the event that restructuring is not complete within the time provided. Stakeholders, including local governments, will continue to watch with cautious optimism as events unfold.