Investigator`s Sixth Report

Exhibit 1
Exhibit 2
Exhibit 3
Court/Estate No.: 25-1835132
IN THE MATTER OF THE PROPOSAL OF
PIIKANI INVESTMENT CORPORATION
PROPOSAL TRUSTEE’S REPORT TO THE CREDITORS
GRANT THORNTON ALGER INC.
All Capitalized terms are as defined in paragraph 1 of the Proposal.
A.
BACKGROUND AND CAUSES OF FINANCIAL DIFFICULTIES
1. On July 16, 2002, the governments of Alberta, Canada and the Piikani Nation entered into a
settlement agreement, which established a trust of $64.3 million (the “Trust”) to be held for the
benefit of the Piikani Nation. CIBC Trust, as Trustee of the Trust, was authorized and required,
upon proper approval of a business plan and loan terms by the Piikani Band Council and Piikani
Investment Corporation (“PIC”), to loan funds from the Trust. Loan agreements totaling $15.525
million were entered into between 2005 and 2007 pursuant to which the Trust advanced $14.025
million to PIC. PIC, in turn, retained $1.84 million. The balance of $12.185 million was loaned to
a number of Piikani Business Entities (‘PBE’s”) including Piikani Energy Corporation (“PEC”),
Oldman Irrigation Ltd. (“OIL”), Piikani Land Holding Corporation (“PLHC”) and Piikani
Oldman Hydro LP (“POHLP”).
2. PIC was originally incorporated on October 16, 2002 under the name of Peigan Investment
Corporation, to operate as a key control of the use of trust funds from the Investment account for
business development.
3. Alger & Associates Inc. (“Alger” or the “Investigator”) was appointed Investigator of the conduct
and financial affairs of PIC and a number of the related PBE’s on October 22, 2009 pursuant to
section 14 of the Winding up and Restructuring Act, by order of the Honourable Justice R. A.
Graesser in Action No. 0901-15297 in the Court of Queen’s Bench of Alberta. The Investigator
has issued five reports since its appointment all of which may be viewed online at
http://www.alger.ca/piikani/index.html.
Report of Trustee
In the Matter of the Proposal of
Piikani Investment Corporation
Page 2
4. Findings in the Investigator’s Second Report of May 13, 2010, concluded that PIC was insolvent.
Since the time funds were loaned from the Trust, no loan repayments have been made and interest
only in the amount of approximately $117,000 has been paid.
5. The following loans and loan guarantees were made to PIC with Investment Account funds
pursuant to the Trust Agreement:
a) $2,000,000 loan dated June 30, 2005 to PEC (“Loan 1”), the full amount of which was
advanced to PEC;
b) $1,000,000 loan dated September 14, 2005 to PLHC (“Loan 2”), pursuant to which $500,000
was advanced to PLHC;
c) $3,000,000 loan dated March 3, 2006 to PEC (“Loan 3”), pursuant to which $2,000,000 was
advanced to PIC, of which $160,000 was advanced to PEC and $1,000,000 advanced to the
Piikani Nation;
d) $7,800,000 loan dated June 6, 2007 to POHLP, through its general partner, PEC (“Loan 4”),
the full amount of which was advanced to POHLP;
e) $1,450,000 loan dated August 10, 2007 to PEC (“Loan 5”), the full amount of which was
advanced to PEC; and
f) $275,000 loan dated February 9, 2006 to OIL (“Loan 6”), pursuant to the full amount of
which $275,000 was advanced to OIL.
6. With respect to each of Loans 1 to 6 inclusive, promissory notes and general security agreements
in favour of PIC were assigned to the Trustee.
7. By reason, inter alia, of the fact that the loans have not be repaid into the Trust, PIC remains
insolvent, and does not have a functioning board of directors, Grant Thornton Alger Inc.
(successor of Alger & Associates Inc.) was appointed Liquidator of PIC, without security, for the
limited purpose of filing and giving effect to a Proposal, pursuant to an Order of the Honourable
Justice R.A. Graesser granted November 20, 2012.
8. The purpose of this report is to provide the Creditors of PIC and other interested parties with
information in connection with the Proposal.
Report of Trustee
In the Matter of the Proposal of
Piikani Investment Corporation
Page 3
B.
TERMS OF REFERENCE
9. In developing this Report, the Trustee has relied upon information contained in the Investigator’s
five reports, its investigations to date, as detailed in the reports previously mentioned, and
discussions with counsel for the Piikani Nation and CIBC Trust. The Proposal Trustee has not
performed an audit or other verification of such information.
C.
THE PROPOSAL
10. The Proposal contemplates the repayment of approximately $14.025 million to the Trust over 25
years, plus interest at 1% per annum, by annual payments of approximately $660,000 per year.
Additionally, $200,000 is to be set aside for Unsecured Creditors. The Trust is by far the largest
Unsecured Creditor since it is owed approximately $23.039 million including $14.025 million
secured, and $9,014 million unsecured.
11. The source of all funds for the repayment of the loans will be income received from the Oldman
Hydro Joint Venture through POHLP. Pursuant to the POHLP partnership agreement, limited
partnership income is used first to pay the expenses of POHLP, including interest payments to be
made towards restructured Loan 4. After expenses are paid, 1% of the income is to be paid to the
General Partner (currently Piikani Resource Development Ltd.) and the other 99% is to be paid to
the Piikani Nation. Under the Proposal, part of that 99% will be used to repay the other loans.
12. The various restructured loans require detailed documentation concerning repayment and other
terms. A detailed list of the required documents is provided in Exhibit 2 to the Proposal, the
Closing Agenda.
D.
CREDITORS
Affected Secured Creditors
13. As indicated above, the value of the security of the Affected Secured Creditor (the Trust) has been
set at $14.025 million for the purpose of the Proposal. The balance of the Trust’s Claim is valued
as an Unsecured Claim for voting purposes. The Trust will receive a Piikani Band Council
resolution, amended and restated loan agreement and related security documents between the
Trustee and Piikani Oldman Hydro Limited Partnership (“POHLP”), by its general partner,
Piikani Resource Development Ltd. (“PRDL”), with respect to Loan 4. With respect to Loans 1,
Report of Trustee
In the Matter of the Proposal of
Piikani Investment Corporation
Page 4
3 and 5, the Trust will receive an assignment from the bankruptcy trustee of PEC, of amounts
owing to the bankruptcy trustee of PEC pursuant to a settlement agreement between the Piikani
Nation and the bankruptcy trustee of PEC. The Trust will also receive an assignment of that
portion of a shareholder agreement between the Piikani Nation and PIC, which is not required to
finance the Unsecured Creditors’ Fund, as well as a joint irrevocable direction to pay, with respect
to Loans 1, 2, 3 and 5. Furthermore, the Trust will receive a lump sum payment of $277,750
directly from the Piikani Nation with respect to Loan 6 and a cash distribution as a secured
creditor from the cash realization, if any, from the receivership or bankruptcy of PEC, net of the
taxed costs of the receivership.
Crown Claims
14. Crown Claims, as defined in the Proposal, are to be paid in full under the terms of the Proposal.
At this time, there are no known crown Claims.
Preferred Creditors
15. The only Preferred Creditor of which the Proposal Trustee is aware is the Proposal Trustee itself,
for its Administrative Fees and Expenses.
Unsecured Creditors
16. According to PIC’s Statement of Affairs, $9,155,421 is owed to the Unsecured Creditors as of the
date of the Proposal. An Unsecured Creditors’ Fund of $200,000 will be made available for the
Claims of Unsecured Creditors. The Proposal contemplates that Unsecured Creditors with
Claims of less than $5,000 shall have their proven Claims paid in full. Where an Unsecured
Creditor’s proven Claim exceeds $5,000, a pro-rata distribution will occur in respect to the unpaid
balance of the Claim from the remainder of the Unsecured Creditors’ Fund.
17. All payments to Unsecured Creditors will be subject to the levy payable pursuant to section 147 of
the BIA.
E.
CONSULTATION PROCESS
18. During the last fourteen months, there have been extensive consultations amongst the Proposal
Trustee, representatives of the Piikani Band Council and CIBC Trust to arrive at the terms of the
Proposal and a recommended form of Court Order to approve the Proposal, to clarify certain
Report of Trustee
In the Matter of the Proposal of
Piikani Investment Corporation
Page 5
terms in the Trust Agreement and to draft the documentation necessary to restructure the secured
debt due by PIC to the Trust.
19. There have been a total of 10 public consultations with members of the Piikani Nation to provide
information and background in respect of the contemplated Proposal. These meetings were
advertised on the Nation’s website, via email, social media, word of mouth and posters. The
meeting dates, locations and presenters are as follows:
i.
December 12, 2012, Brocket, Councilor Angela Grier
ii.
February 25, 2013, Brocket, Bruce Alger
iii.
February 26, 2013, Lethbridge, Michael Pflueger
iv.
February 28, 2013, Edmonton, Michael Pflueger
v.
March 7, 2013, Calgary, Michael Pflueger
vi.
March 12, 2013, Brocket, Michael Pflueger to elders
vii.
December 9, 2013, Edmonton, Michael Pflueger
viii.
December 10, 2013, Calgary, Michael Pflueger
ix.
December 17, 2013, Lethbridge, Michael Pflueger
x.
January 15, 2014, Brocket, Michael Pflueger
20. On January 14, 2014, the Piikani Band Council passed a Band Council Resolution approving this
Proposal.
F.
BENEFITS OF THE PROPOSAL
21. PIC plays a fundamental role in the Trust, as defined and discussed in Schedule 2 to the Trust
Agreement. Three of the seven directors of PIC shall not be band members; no funds are to be
loaned to Piikani business entities without a valid resolution of the PIC Board and a Piikani Band
Council resolution. Presently, PIC does not have a functioning Board of Directors. With its
current insolvency, it is highly unlikely that PIC will be able to attract new directors. Once
restructured, PIC will be more likely to attract new board members.
22. The Proposal is designed to put PIC in good financial standing and to restructure the various loan
agreements in order to maximize the amount repaid to the Investment Account of the Trust. It is
estimated that approximately $14.1 million, exclusive of interest, will be repaid to the Trust over
time.
Report of Trustee
In the Matter of the Proposal of
Piikani Investment Corporation
Page 6
23. It is also a term of the Proposal that the Court, pursuant to the Trustee Act, RSA 2000, clarify
certain aspects of the operation of the Trust as follows:
i.
The Trust shall make no further loans to PIC either as ultimate borrower or as
intermediary.
ii.
Any portion of the $300,000 annual operating costs to be paid from the Trust to PIC,
which are not paid in a given fiscal year, may be paid at a later date.
iii.
No loan or loan guarantee from the Trust shall be approved unless the board of directors
of PIC and the loan recipient are dealing at arm’s length.
iv.
The minimum duties of the board of directors of PIC include ensuring the timely
completion of audits, submission of budgets, financial statements and reports to the
Piikani Nation Council.
v.
No shares of PIC shall be transferred without approval of the Piikani Nation Council.
24. The clarifications sought are outlined in the Draft Order Approving Proposal and Clarifying
Trust Agreement (Exhibit 1 to the Proposal).
G.
CURRENT FINANCIAL POSITION
25. PIC is not operating and its current financial position is as outlined in its Statement of Affairs.
H.
CREDITORS' CLAIMS
26. The amount of known creditors is believed to be as outlined in PIC’s Statement of Affairs.
I.
REMUNERATION OF TRUSTEE
27. The Proposal Trustee's fees and those of its counsel will be based on the time spent by the
Proposal Trustee, its counsel and the various members of their staff, at their respective regular
billing rates, plus any direct out-of-pocket expenses incurred. All Administrative Fees and
Expenses of the Proposal Trustee will be taxed by the Court. The Proposal Trustee and its
counsel will be entitled to bill and collect regular interim fees as approved by either the Court or
Inspectors elected by the Ordinary Unsecured Creditors.
Report of Trustee
In the Matter of the Proposal of
Piikani Investment Corporation
Page 7
J.
ESTIMATED REALIZATIONS IN A LIQUIDATION SCENARIO
28. Should this Proposal not proceed, it is expected that there will be no funds available to satisfy the
Claims of Unsecured Creditors.
K.
PROCEDURE FOR VOTING ON THE PROPOSAL
29. The primary purpose of the Creditors’ Meeting, to be held on February 24, 2014, is to permit
creditors to consider the acceptance or rejection of the Proposal. For the Proposal to be accepted,
the BIA requires that at least two thirds (66.67%) of proven and voting Unsecured Creditors by
dollar value and more than fifty percent (50%) of proven and voting Unsecured Creditors by
number , of those who vote, vote in favour of the Proposal at the meeting either in person, by
proxy, or by voting letter.
30. To be eligible to vote, creditors must file with the Proposal Trustee, Grant Thornton
Alger Inc., before the meeting, a Proof of Claim form, properly completed, signed and
witnessed as required, accompanied by supporting documentation.
31. Blank proof of claim forms and proxy forms have been included with this report. If you are
planning to attend the meeting in person, you are encouraged to submit your voting letter to the
Proposal Trustee in advance of the Creditors’ Meeting to have your vote registered. Those
creditors who do not intend to have a personal representative at the meeting, to be held on
February 24, 2014, should also complete and submit the voting letter which is enclosed, indicating
their vote for or against the acceptance of the Proposal.
32. If the Proposal is not accepted by the requisite majority of proven voting Unsecured
Creditors, PIC will automatically be deemed to have made an assignment in bankruptcy
as of the date of the vote defeating the Proposal.
33. If the Proposal is accepted by the statutory majority, the Proposal Trustee will make an
application to the Court for approval of the Proposal pursuant to an Order, substantially in the
form set out in Exhibit 1 to the Proposal. If the Court gives such approval, the Proposal, as
approved, will be binding on all the creditors with claims pursuant to the provisions of the BIA.
Report of Trustee
In the Matter of the Proposal of
Piikani Investment Corporation
Page 8
L.
RECOMMENDATION
34. The Trustee respectfully recommends that the Unsecured Creditors accept the Proposal as it is in
the best interest of Unsecured Creditors, PIC, the Piikani Nation and the Trust.
DATED at Calgary, Alberta, this 6th day of February, 2014
GRANT THORNTON ALGER INC.
Per:
Bruce Alger, CA•CIRP
Exhibit 4
In the Matter of the Proposal of Piikani Investment Corporat
First Meeting of Creditors
February 24, 2014
List of creditors who have filed proofs of claim
Creditor Name
Claim Filed
Gowling Lafleur Henderson LLP
Piikani Trust (CIBC Trust) - not yet voted
AIG Insurance Company of Canada (subrogating
Dale McMullen - Not proven
Brian Jackson
Rod North Peigan
Peter Strikes With A Gun
Janet Potts
Liliana Kostic
$
27,142.03
23,038,998.12
64,280.47
220,684.55
6,400.00
3,900.00
1,400.00
1,400.00
500,000.00
Total
$
23,864,205.17
Exhibit 5
Exhibit 6
Exhibit 7
Exhibit 8
Exhibit 9
Exhibit 10
Exhibit 11
Exhibit 12
Court/Estate No.: 25-1835132
IN THE COURT OF QUEEN’S BENCH OF ALBERTA
IN BANKRUPTCY AND INSOLVENCY
IN THE MATTER OF THE PROPOSAL OF
PIIKANI INVESTMENT CORPORATION
NOTICE OF DISALLOWANCE OF CLAIM, RIGHT TO PRIORITY
OR SECURITY OR NOTICE OF VALUATION OF CLAIM
(section 135(2) of the Bankruptcy and Insolvency Act (“BIA”) )
TAKE NOTICE THAT Grant Thornton Limited (estates formerly administered by Grant
Thornton Alger Inc.), in its capacity as Trustee of Piikani Investment Corporation (“PIC”) has
reviewed the Proof of Claim of Edwin Yellow Horn, dated March 29, 2014 (the “Proof of Claim”) in
the amount of $12,500.
TAKE NOTICE THAT the claim of Edwin Yellow Horn has been disallowed for the
following reasons:
1. This claim does not supply sufficient information or back up to support any of the amount
claimed.
2. You are not a person who is meant to be protected by clause 7.2 of the bylaws of PIC as you
were never an officer or director or person that performed services for PIC, which resulted
in legal proceedings against you, which are meant to be subject to that bylaw provision.
3. You have not provided any evidence that you have incurred any expenses, which would
entitle you to indemnity under clause 7.2 of PIC’s corporate bylaws.
4. Your overall claim for indemnity is subject to prior existing proceedings in which you are a
Party and wherein you have sought relief against Parties other than PIC, including the Piikani
Nation, and accordingly your claim against PIC is barred by res judicata.
AND FURTHER TAKE NOTICE THAT if you are dissatisfied with our decision in
disallowing your claim in whole or in part, or in disallowing the security or valuation of your claim,
you may appeal to the Court within the 30-day period after the day on which this Notice is served or
sent, or within such further period as the Court may, on application made within the same 30-day
period, allow.
IF YOU FAIL TO TAKE ACTION WITHIN THE PRESCRIBED TIME
PERIOD, THIS NOTICE OF REVISION OR DISALLOWANCE WILL BE BINDING
UPON YOU.
DATED AT Calgary, Alberta this 2nd day of April 2014.
GRANT THORNTON LIMITED (estates
formerly administered by Grant Thornton
Alger Inc.)
Per
TO:
VIA EMAIL:
VIA REGISTERED MAIL:
WSLegal\029736\00023\9597682v1
_______________________________
Bruce Alger
Senior Vice President
Edwin Yellow Horn
[email protected]
PO BOX 2612
PINCHER CREEK, AB TOK 1W0
Exhibit 13
Exhibit 14
Exhibit 15
Exhibit 16