Update on the ABC District Situation – April 2, 2015

NOTE: The following is a summary of information on the current situation taking place in the ABC District, and is derived from reports, court documents, and other communications.

The Court hearing of the Alberta-British Columbia (ABC) District resumed on March 27. At that time, the Court approved the District’s choice of Chief Restructuring Officer (CRO) and granted the District a 90 day extension of its stay period (until June 26, 2015). The Court also approved the sale of four properties.

Deloitte, the Court-appointed Monitor, supported the extension of the stay period in its second report to the Court, writing that “the District Group is acting in good faith and with due diligence.” It had also approved the District’s choice of a CRO and the land sales.

Kluane Financial Services (and designated representatives) was approved as the CRO for the District Group.The Court had previously granted the District permission to pursue the appointment of a CRO on February 20. Under the CRO, work will continue in the development of a plan to present for the consideration of creditors.

The four properties which the Court granted approval to sell include Chestermere Lands owned by Encharis Community Housing and Services, St. Albert lands owned by the District, and Faith School lands owned by the District. The St. Albert lands include the building of King of Kings Lutheran Church, which the congregation intends to vacate upon closing of the sale.

At the Court’s request, the Mileage Fund (a fund to which ABC District church workers could contribute for assistance in financing the purchasing of vehicles) will move to a separate trust account pending feedback from Creditors’ Committees.

The Court again tabled the District’s request to release a percentage of congregational remittances to Lutheran Church–Canada (LCC). Congregations voluntarily remit Mission Offerings to their District, which in turn passes on a portion to LCC for national and international programming. The ABC District historically passes on 35% of congregational donations to LCC on a monthly basis (40% on an annual basis). These regular remittances to LCC have been frozen since the District entered CCAA protection in January. The Court will consider the request again at the next hearing on June 27.

In response to these financial challenges, Lutheran Church–Canada’s Board of Directors has frozen the salaries of all LCC employees. In an effort to maintain current overseas mission commitments, it has also approved a deficit operating budget for the year, to be reviewed as the year progresses. LCC’s President Robert Bugbee has also contacted congregations in Alberta and British Columbia to encourage them to consider directly remitting to LCC the percentage of their donations that would normally be remitted to LCC via District.

District Restructuring Efforts

In an affidavit to the Court in advance of its March 27 hearing, the District Group reported on its restructuring efforts to date. It reported that the Joint Restructuring Committee began meeting February 24, 2015.

Among the Committee’s initial work was reviewing submissions made by CRO candidates, participating in interviews with the candidates, and making recommendations regarding the appointment of the CRO.

The Committee has also begun examining properties owned by the District to consider whether and when certain properties should be sold (work it will continue with the newly appointed CRO). The Committee is also reviewing various proposals submitted by Depositors and Congregations for resolving the current situation. The Joint Restructuring Committee will also consult with the Creditor Committees once they have been appointed. With the appointment of the Monitor, and more recently the CRO, the primary role of the Joint Restructuring Committee is to provide information and recommendations.

On March 16, Deloitte reported that a number of members had already been appointed to the two Creditors’ Committees in accordance with a Court-ordered process approved at the February 20 meeting. Reserved positions on the Church Extension Fund (CEF) committee as well as the District Investments Ltd. (DIL) committee are filled. Elections by depositors to fill the rest of the positions on the two committees are currently underway (to be completed April 14).

The District’s affidavit also notes that the claims process approved by the Court in February is currently in process, with plans to see the process “substantially completed” for all Claimants by May 5, 2015.

District’s actions under review

Some questions remain, however. In its second report to the Court, Deloitte expressed concern that the District may have contravened provincial securities legislation, and it advised the District Group of these concerns. Deloitte further reports that “the Monitor understands that the Applicants are now having ongoing discussions with the [Alberta Securities Commission] and the [British Columbia Securities Commission] in that regard.” They also note that they are continuing to review withdrawals made from the CEF and DIL in the year prior to the January 2015 moratorium to ensure no preferential payments were made.

The District’s Board of Directors has also appointed a task force to conduct “a review of the culture and decisions of the ABC District that led to [the] 2015 CEF crisis.” “We are reviewing everything possible to determine what led our District to this point,” the Task Force writes, “and we will be making recommendations for improvements that will help us fulfill the Great Commission better as God’s church in 21^st century Canada.”

The District’s Board of Directors appointed two initial members to the task Force: Bryan Adams (Stony Plain, Alberta), and Rev. Michael Schutz (Penticton, British Columbia). The Task Force will make additional appointments to ensure the group’s arm’s-length independence from the District BOD. “We want to make it clear that the District Board has given us wide latitude, and other than asking us to conduct the review, is not directing our work in any way,” the Task Force explains. The Task Force is scheduled to report on its investigation to the District Convention in May as well as to the District’s new Board of Directors following convention.

The Canadian Lutheran is following the situation in the ABC District closely, posting news summaries as information becomes available. Keep up to date here.

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