Teal Jones Group factories reorganize under court protection

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Surrey-based Teal Jones Group, the multigenerational British Columbia forestry company with three factories and about 400 employees in the Lower Mainland, sought court protection from its creditors on Wednesday as declining revenue left it without cash to pay its bills. accounts.

On Wednesday, British Columbia Supreme Court Justice Gordon Weatherill granted Teal Jones a stay of insolvency proceedings under the Business Creditors Arrangement Act, giving the company a chance to raise the cash it needs. , including by selling assets such as land on Haida Gwaii. .

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Historically, Teal Jones had been able to run profitable operations and reinvest those profits into the business, but it faced a growing cash crunch through 2023, company Vice President Gerrie Kotze said in an affidavit to Teal Jones’ court petition.

The company was founded in British Columbia, but also has extensive operations in the U.S., both in Washington state and southern states, including a 57 percent partnership in a new $110 million factory under construction in Plain Dealing, Louisiana.

However, lumber markets collapsed for the company during 2023 and lower lumber prices, coupled with inflation from higher labor costs and rising interest rates, left it without enough revenue to remain in the numbers. positive.

“Petitioners are insolvent from a cash flow standpoint and are unable to meet their obligations when they generally fall due,” Kotze said.

Its situation worsened because it had to reduce its operations starting in March, and Kotze said the company needed “immediate financing to resume operations and cover payroll,” which he estimated between $500,000 and $1 million per week.

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Teal Jones was also the logging company at the center of protests over the logging of old growth trees in Fairy Creek on Vancouver Island, which the company says cost it $40 million.

The company has estimated, with the help of court-appointed monitor PwC, that it will need $60 million in financing, including $3 million within the first 10 days of the proceedings, to get its operations back on track.

There was no response Friday at Teal Jones’ offices in Surrey, but in the company’s court filing, Kotze said court protection will help preserve the value of its business while it takes steps to raise cash and reorganize its operations toward a possible sale of the company.

“The petitioners intend to seek approval of a sales and investment application process,” Kotze said. “(The process) is expected to begin in May 2024 and conclude in or around December 2024.”

The crisis is bad news for a historic British Columbia forestry company whose history dates back to 1946, when company founder Jack Jones opened a one-man cedar shingle factory on Lu Lu Island in New Westminster.

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The company, now run by his sons Dick and Tom Jones, has logging licenses, logging operations and sawmills that produce wood products ranging from cedar shakes and dimensional lumber to specialty cuts for remanufacturing, including specialty products such as grained Sitka spruce. fine used in guitar tops. .

Teal Jones has, in recent years, opted to diversify into the southern US alongside other British Columbia companies and in 2018 increased its holdings by purchasing two factories in Virginia at a time when it viewed British Columbia as a less safe place to invest.

Its US holdings now consist of operations in Sumas, Washington, Virginia, Oklahoma, Mississippi and its 57 per cent stake in the new factory under construction in Louisiana, which Teal Jones has put up for sale as part of its legal proceedings.

Industry consultant Russ Jones called it a sensible strategy, but it was “badly timed,” particularly with respect to the construction of a new plant.

Lumber prices in the southern United States, where operations had been reliably profitable, collapsed at the same time Canadian mills were also struggling to break even.

“Basically, it’s a big loss of position for most steel mills in the U.S. today,” Taylor said. “So it’s difficult (because) that’s where all your assets are. “The more they run, the more they lose.”

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In court papers, Kotze said Teal Jones’ liquidity crisis came to a head last November when the value of its lumber inventory fell below the ratio required in a loan agreement with major U.S. lender Wells Fargo and the bank, which is owed $160 million, issued a Notice of Default.

Efforts to raise money since then have included putting real estate properties near Sandspit, Haida Gwaii, up for sale, seeking the sale of about $15 million in softwood timber rights deposits and a property sales lease for its local operations on Trigg Road. in North Surrey.

The next court hearing in the Supreme Court of British Columbia, where Teal Jones is expected to apply for an extension of the protection order, is scheduled for May 3. On Friday, the company also planned to seek recognition of the proceeding in the U.S. Bankruptcy Court for the District. of Delaware.

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