Long Run’s CCAA Proceedings: Impacts on Landowner Class Action

Author: kristian-toivonen posted in: Real Estate

Long Run Exploration Ltd. (“Long Run”) has recently entered into Companies’ Creditors Arrangement Act (CCAA) proceedings. This process is designed to help financially distressed companies restructure their affairs, but it also has significant implications for landowners with lease agreements. KMSC Law LLP is committed to keeping you informed on how these developments affect your position in our ongoing class action.

If you are a landowner with a Long Run lease on your land, contact our office for assistance in ensuring you are paid for your lease, no matter how proceedings develop.

What is a CCAA?

The Companies’ Creditors Arrangement Act (CCAA) allows insolvent companies that owe more than $5 million to creditors to restructure their business and financial affairs. This process is supervised by the court and allows the company to continue operations while finding a way to pay off its debts.

Overview of Long Run’s Financial Situation

Long Run’s financial troubles have been mounting for some time. As of December 31, 2023, the company had current assets of $26.6 million and non-current assets of $755.5 million. Despite these assets, Long Run’s total liabilities stood at $1.4 billion, far exceeding its assets. The main secured debts include $350.1 million owed to China Construction Bank (CCB) and $543.9 million owed by Long Run’s parent company, Calgary Sinoenergy Investment Corp. Additionally, Long Run has significant environmental obligations and owes $52.4 million to various trade creditors.

Timeline Leading to CCAA Proceedings

Long Run’s financial strain led China Construction Bank Toronto Branch (“CCBT”) to initiate CCAA proceedings on July 4, 2024. Prior to this, CCBT had advanced loans to Long Run, which matured in December 2023 without repayment. After unsuccessful attempts to restructure or sell assets, Long Run was unable to find a solution to its liquidity crisis, prompting CCBT to seek court intervention.

Key Terms of the Initial CCAA Order

Recently, on July 4, 2024, the Court of King’s Bench of Alberta granted an initial order under the CCAA, which includes several crucial provisions:

1. Stay of Proceedings: All court and administrative matters against Long Run are paused, including matters related to Land and Property Rights Tribunal (“LPRT”). This stay is in effect until July 14, 2024, and prevents creditors from taking legal action against Long Run without court permission. 
2. Business Operations: Long Run is allowed to continue its business operations and maintain possession of its assets, but this is subject to the oversight of a court-appointed monitor, FTI Consulting Canada Inc. (“FTI”). 
3. Financial Restrictions: Long Run can make certain priority payments such as wages and salaries but cannot pay creditors or incur new liabilities outside the ordinary course of business without approval from FTI.
4. Monitor’s Role: FTI, the monitor, has broad powers to oversee Long Run’s operations and report to the court. 

Implications for Landowners

One of the most pressing concerns for landowners with lease agreements is the potential non-payment of annual rent. The initial CCAA order permits Long Run to pay rent to landlords under leases with the monitor’s consent, but it does not require them to do so. Given Long Run’s precarious financial situation, it is highly likely that they will stop paying all annual rent.

Next Steps

There is a comeback hearing scheduled for July 12, 2024, where further developments are expected. One critical aspect to watch is whether an interim lender steps up to provide the necessary financing to keep Long Run operational. Without this financing, the company may run out of cash in as little as the next two weeks, further complicating the situation for landowners.

In these proceedings, KMSC will advocate for affected landowners. Should Long Run move into bankruptcy proceedings and seek that all its debts to landowners be extinguished, KMSC will advocate that such debts should follow the relevant lease site for future section 36 applications. 

Staying Informed with KMSC Law

The CCAA proceedings involving Long Run are complex and evolving, with significant implications for landowners with lease agreements. While the situation is fluid, we are diligently working to protect our clients’ interests and ensure they are kept informed of any new developments. Stay tuned to our social media channels and blog for the latest updates.

We understand that these developments can be concerning, and we are committed to keeping our clients informed every step of the way. Please feel free to contact our Real Estate Lawyers if you have any questions or need further clarification on how these proceedings may impact your specific situation.

For immediate concerns or inquiries, please reach out to the KMSC office. We are here to support you through this challenging time.