IN THE COURT OF QUEEN S BENCH OF ALBERTA JUDICIAL DISTRICT OF CALGARY

Transcription

1 Action No IN THE COURT OF QUEEN S BENCH OF ALBERTA JUDICIAL DISTRICT OF CALGARY IN THE MATTER OF THE COMPANIES CREDITORS ARRANGMENT ACT, R.S.C. 1985, c. C-36, AS AMENDED AND IN THE MATTER OF IMPAX ENERGY SERVICES LTD., IMPAX ENERGY SERVICES INCOME TRUST, IMPAX ENERGY SERVICES OPERATING TRUST, IMPAX ENERGY SERVICES MASTER LIMITED PARTNERSHIP, DWAYNE HOMMY TRUCKING GENERAL PARTNER LTD., DWAYNE HOMMY TRUCKING LIMITED PARTNERSHIP, MCCLELLAND OILFIELD RENTALS GENERAL PARTNER LTD., MCCLELLAND OILFIELD RENTALS LIMITED PARTNERSHIP, EGOC ENVIRO GROUP GENERAL PARTNER LTD. and EGOC ENVIRO GROUP LIMITED PARTNERSHIP FOURTH REPORT OF KPMG INC. IN ITS CAPACITY AS MONITOR January 25, 2010

2 IN THE MATTER OF THE IMPAX GROUP TABLE OF CONTENTS 1.0 INTRODUCTION SCOPE LIMITATIONS AND RESTRICTIONS BACKGROUND PURPOSE THE PROCEEDINGS CASH FLOW BUDGET CONCLUDING COMMENTS...6 INDEX TO APPENDIX A Impax Press release dated January 20, i-

3 1.0 INTRODUCTION 1.1 On December 14, 2009, Impax Energy Services Ltd., Impax Energy Services Income Trust, Impax Energy Services Operating Trust, Denray Rathole Drilling General Partner Ltd., Dwayne Hommy Trucking General Partner Ltd., McClelland Oilfield Rentals General Partner Ltd., and EGOC Enviro Group General Partner Ltd. (collectively Impax ) filed an application pursuant to the provisions of the Companies Creditors Arrangement Act ("CCAA") in the Court of Queen s Bench of Alberta (the Court ) and the Court granted an ex parte initial order (the Initial Order ) which, among other things, appointed KPMG Inc. as monitor (the Monitor ) of Impax and the five limited partnerships as noted below (collectively referred to as the Impax Group or the Company ): Impax Energy Services Master Limited Partnership ( Impax LP ) Denray Rathole Drilling Limited Partnership ( Denray ) Dwayne Hommy Trucking Limited Partnership ( DHTG ) McClelland Oilfield Rentals Limited Partnership ( McClelland ) EGOC Enviro Group Limited Partnership ( EGOC ) 2.0 SCOPE LIMITATIONS AND RESTRICTIONS 2.1 The information contained in this report has been obtained from the records of the Impax Group and is based upon discussions with, and representations made by, the Company's management ( Management ) and other professional advisors retained in this matter. The accuracy and completeness of the financial information contained herein has not been audited or otherwise verified by the Monitor or KPMG LLP nor has it necessarily been prepared in accordance with generally accepted accounting principles and the reader is cautioned that this report may not disclose all significant matters about the Impax Group. Accordingly, the Monitor does not express an opinion or any other form of assurance on the information presented herein. 2.2 Cash flow forecasts and financial projections prepared by Management have been relied upon by the Monitor in the preparation of this report. Such information is based on Management's assumptions regarding future events. The Company's actual operating results and cash flow will vary from the future oriented financial information contained herein and readers are cautioned that such variation may be material. 2.3 The Monitor assumes no responsibility or liability for any loss or damage suffered by any party as a result of the circulation, publication, reproduction or use of this report. Any use which any party makes of this report, or any reliance on or decisions to be made based on it, is the responsibility of such party. Note: All dollar amounts identified in this report are expressed in Canadian dollars unless otherwise specified and are rounded which may cause minor inconsistencies to subtotals and totals. -1-

4 3.0 BACKGROUND 3.1 As indicated above, on December 14, 2009, Impax applied to the Court and the Court granted the Initial Order, including a stay of proceedings until January 13, The stay was subsequently extended to February 5, 2010 by Court Order granted on January 19, Relevant information and documentation related to these proceedings (the Proceedings ) including the Initial Order, affidavits and the Monitor s reports may be obtained from the Monitor s website ( 3.3 We have repeated certain background information below for ease of reference, which has been included in the Monitor s previous reports, as follows: On December 17, 2009 the Company was granted an Order approving the sale of the assets of McClelland, DHTG and EGOC to Alberta Ltd (the MDE Sale ). The balance of the proceeds due on closing in the amount of $12,094,046 was paid to the Monitor on December 18, 2009 to be held in trust for subsequent distribution pending further order of the Court On January 19, 2010 the Company was granted an Order approving the sale of the outstanding limited partnership units of Denray and all of the shares of Denray GP and any amounts due to Impax LP and Impax Energy Services Ltd. from Denray and Denray GP (the Denray Sale ). The balance of the proceeds, excluding a $250,000 holdback held by the buyer s legal counsel, in the amount of $3,476,861 was paid to the Monitor on January 20, 2010 to be held in trust for subsequent distribution pending further order of the Court The only other assets remaining are the tax pools/losses and computer equipment. The Monitor understands that the computer equipment is limited with realizable value of less than $3, The primary stakeholder is the loan syndicate comprising Canadian Imperial Bank of Commerce, Canadian Western Bank and Toronto Dominion Bank (the Loan Syndicate ). 3.4 The Monitor s previous reports summarized certain background Company information which will not be repeated here. Readers are referred to the Monitor s website ( for additional information. 4.0 PURPOSE 4.1 The purpose of this Fourth Report is to provide the Monitor s comments related to the Company s application for the extension of the stay of Proceedings to March 26, 2010 and expansion of the Monitor s powers to facilitate certain administrative matters to conclude the Proceedings and the Monitor s application for the distribution Order. -2-

5 5.0 THE PROCEEDINGS 5.1 The Company is seeking an extension to March 26, 2010 to attend to administrative matters remaining, including filing of certain statutory returns, attendance to the Denray holdback, realization of the computer equipment and attendance to storing books and records. In addition, the Company is seeking an application that the previously submitted resignation of Trustees becomes effective on the granting of the requested Order being sought on January 26, 2010 and the resignation of the directors and officers becomes effective retroactive to the filing of the Denray Sale Monitor s certificate subject to the granting of the requested Order being sought on January 26, Accordingly, the Company is also seeking an expansion of the Monitor s powers to facilitate certain administrative matters to conclude the Proceedings. 5.2 The Monitor is seeking authorization and direction to pay approximately $13.5 million as follows: Pay an interim distribution from the proceeds of the MDE Sale and the Denray Sale in the amount of $13.1 million to the Loan Syndicate Pay professional fees of approximately $211,000 to: McMillan LLP for $8,697 for services, including disbursements and taxes of $1,189, provided during the period January 1 to 20, PWC LLP for $10,500 for services, including disbursements and taxes of $500, provided during the period December 15, 2009 to January 20, Macleod Dixon for $25,425 for services, including disbursements and taxes of $1,598, provided during the period December 4 to 31, KPMG Inc. for $127,676 for services, including disbursements and taxes of $19,245, provided during the period December 1 to 31, KPMG Inc. for $39,109 for services, including disbursements and taxes in of $3,636, provided during the period prior to the Filing for advisory services related to estimate of valuation range Pay approximately $225,000 to the Company to fund corporate and professional fees in accordance with the cash flow budget attached to the affidavit of Mr. Hirji as noted below for the period January 25 to March 31, Total proceeds held in trust, after the release of approximately $13.5 million as noted above, are approximately $2 million comprising: A reserve for the Administrative and Directors Charge aggregating $550, A contingency reserve of $1.5 million to attend to possible priority claims, of which we are not aware of any right now, but believe it to be prudent to hold back funds until there is sufficient time to contemplate whether notice may be appropriate to be served on creditors generally. 5.4 At this time, the Monitor anticipates distributing the balance of the funds held in trust prior to the expiration of the requested extension date of March 26,

6 5.5 The Company issued a press release on January 20, 2010 which references the Denray Sale, the resignation of the Trustees and Directors and the distribution Order. A copy of the press release is attached as Appendix A. 6.0 CASH FLOW BUDGET 6.1 The Company filed a cash flow budget for the period January 25, 2010 to March 31, (the Jan 25 Budget ) as attached to the affidavit of Karim Hirji, dated January 25, A copy of the affidavit and Jan 25 Budget will be available on the Monitor s website. Due to the short period of time that has past since the Monitor s Second Report, dated January 12, 2010, which included a budget to actual analysis for the period December 14, 2009 to January 8, 2010, the Monitor has not provided an update for actual results from January 9 to January 22, However, nothing has come to the Monitor s attention to cause it to believe that there are any material adverse changes to the previously filed cash flow budget as at the date of this report. 6.2 A summary of the Jan 25 Budget is as follows: $000's Jan 25 to Mar 31, 2010 Head Office and Corporate Costs Jan 25 Budget Consultant and Employee Expenses (84) Corporate Office Expenses (5) Release of Funds Held in Deposit Denray holdback amount (due March 20, 2010) 250 GST Refunds 25 Visa Deposits with TD Bank 40 Restructuring Professional Fees - Burstall LLP (Company Counsel ) (25) - KPMG Inc. (Includes Monitor and Monitor's Counsel) (170) Cash Flow Summary (89) 315 (195) Net cash flow 31 Plus: Cash Funding Req'd (Denray Sale Proceeds) 225 Cash Surplus - After Cash Funding 256 Opening Cash (net of o/s cheques) 53 Ending Cash Balance

7 6.3 We offer the following comments related to the Jan 25 Budget: Head Office and Corporate Costs are projected to be $89,000 which primarily relate to compensation for consultants and employees to assist with activities related to administrative matters to conclude the Proceedings The Denray holdback funds in the amount of $250,000 relates to the collection of Denray accounts receivable, and subject to collections is payable to Impax on March 20, 2010 (assuming no amounts are still uncollected as of that date) Restructuring professional fees are projected to be $195,000, including approximately $100,000 related to services provided in January 2010 which have not yet been invoiced As the release of the Denray holdback and GST refund is not expected to occur until the week of March 20, 2010, the Company requires additional funding of $225,000 over the forecast period in order to satisfy its weekly cash requirements prior to March 20, The closing cash balance of $309,000 is anticipated to be paid to the Loan Syndicate prior to March 31, Based on the results to date and the projections to March 31, 2010, we do not believe creditors have been prejudiced nor would they be materially prejudiced by the extension of the stay to March 26, The Monitor s counsel has rendered an opinion that the Loan Syndicate has valid security interest in the assets of the Applicants. Accordingly, the Loan Syndicate is entitled to the proceeds held in trust by the Monitor, subject only to any super-priority claims and the Administrative and Directors Charge (as defined by the Initial Order). -5-

8 7.0 CONCLUDING COMMENTS 7.1 Management has acted, and continues to act, in good faith and with diligence with respect to the restructuring affairs. 7.2 The Monitor supports the extension to March 26, 2010 to allow the Company time to conclude the Proceedings, including attendance to administrative matters and any closing and post closing matters related to the Denray Sale. All of which is respectfully submitted at Calgary, Alberta this 25 th day of January, KPMG Inc. In its capacity as Monitor of the Impax Group Per: Tim Reid Pam K. Boparai Senior Vice President Vice President -6-