Labrador Iron Mines files CCAA case to restructure, refinance business

By Caroline Salls

Pittsburgh, April 9 – Labrador Iron Mines Holdings Ltd. launched a court-supervised restructuring process on April 1 under the Companies' Creditors Arrangement Act to facilitate a restructuring and refinancing of its business operations, according to a news release.

Duff & Phelps Canada Restructuring Inc. has been appointed as the company’s CCAA monitor.

The company said it did not resume mining operations in the 2014 or 2015 operating seasons because of deteriorating iron ore market conditions, particularly in the context of Labrador’s previous high operating costs.

Labrador said it has a “very significant working capital deficit” and has not met some of its financial obligations. The company said it needs to complete a financial restructuring in order to continue as a going concern and preserve the long-term value of its assets.

According to the release, the CCAA proceedings will give Labrador the time and stability to restructure its business, negotiate a restructuring plan with stakeholders, compromise creditor claims, restructure key operating contracts, secure new financing and otherwise consider restructuring and refinancing options.

An initial CCAA order was obtained on April 2 by the Ontario Superior Court of Justice. That order expires on May 1, subject to extension as the court deems appropriate.

Under the initial order, all parties to agreements with the company are restrained until further court order from discontinuing, altering, interfering with or terminating the supply of goods and services, as long as Labrador pays for the goods or services as agreed.

In addition, all parties are prohibited from filing or continuing legal action against the company.

Project interest sale

Concurrently, Labrador said it has completed a transaction under its joint venture agreement with Tata Steel Minerals Canada under which Tata has acquired Labrador’s remaining interest in the Howse project for $5 million.

The sale proceeds will be used to fund ongoing operating and stand-by costs and care and maintenance expenses, as well as to finance the company’s restructuring.

Debt details

Labrador said it has no current or long-term bank debt, and its liabilities consist of accounts payable and a deferred revenue obligation. The company said most of this debt has been outstanding since the end of its operating season in 2013.

The company said its creditors have been largely supportive of Labrador’s efforts to restructure its affairs and many have, for a period of more than one year, continued to provide goods and services and have not sought to enforce payment or other remedies.

The company had a cash balance of C$5.84 million for the period of March 28 to April 3, according to financial projections included with a monitor’s report. That balance is expected to decline to C$3.57 million as of May 29.

The monitor said Labrador had an accumulated deficit of C$459 million as of Dec. 31.

Future plans

Labrador said it intends to develop and implement a comprehensive restructuring plan, which may require the company to monetize some non-core assets to fund its operating costs and other expenses or secure interim debtor-in-possession financing.

Also, Labrador said it will continue negotiating a potential support arrangement with RBRG Gerald Metals, an existing creditor and offtake customer, which could provide working capital financing to fund Labrador’s ongoing corporate and stand-by activities and, as a separate component, potential future project development financing.

Based in Toronto, Labrador Iron Mines is engaged in the mining, exploration and development of iron ore deposits.

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