Update on the ABC District situation – February 24, 2015

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

On February 20, the Alberta-British Columbia District and affiliated entities (collectively “the District Group”) were granted an extension of the Stay Period under the Companies’ Creditors Arrangement Act (CCAA). The Court granted an extension until March 27, at which time the ABC District must report back to the Court.

The hearing saw the Court approve a number of requests that the ABC District had presented in a filing made February 13. Among these was leave to pursue a proposed Claims process, permission to appoint a Chief Restructuring Officer (CRO), authorization to make payments to vendors related to the Prince of Peace Manor and Harbour, and permission to subdivide lands owned by Encharis Community Housing Services.

In its February 13 application to the Court, the ABC District had requested an extension of the Stay Period until May 20. The Court-appointed Monitor (Deloitte Restructuring Inc.), in its February 15 report, instead suggested an extension until March 20 to ensure a CRO is appointed as soon as possible. “The Monitor believes that the appointment of a CRO is necessary to alleviate depositor concerns regarding the existing leadership of the District Group, increase depositor confidence in the restructuring process, provide additional direction and streamline the restructuring process and provide needed financial and restructuring expertise to the District and DIL,” Deloitte writes in its first report.

The District notes that it has been interviewing candidates for the CRO position and will submit a shortlist to the Monitor in the coming week, as the selected candidate will need to be approved by the Court. They also note that they will be “initiating the Claims process as detailed in the application,” and that they will have “more details on the Claims process to release in the coming days.” “The Claims Package will be posted on the Monitor’s website,” Deloitte notes in its report to the Court, “and sent by regular mail to all known claimants.”

The District further reports that it is developing a timeline for the development of a restructuring Plan, in which they will include meeting dates and times. “The CCAA process, however, doesn’t mean everything we spoke about won’t happen,” the District writes in a February 20 post on its website. “We, working with the Monitor, will still develop a Plan that provides the extra information that people said they wanted. That plan will be presented to depositors in person. Depositors still have the same choice they had before and will vote formally on the Plan. And if the Plan doesn’t work, we move ahead with liquidation.”

The Monitor’s February 17 application to the Court also requested authorization for the creation of two creditors’ committees (one each for District Investments Ltd. and the Church Extension Fund)—a request that was granted. The committees, which will be composed of creditors, are mandated to seek to maximize the amount ultimately available for distribution to creditors and to consult with and advise the District Group and the Monitor regarding their work.

On February 24, CBC News Edmonton published a report on these latest developments.

LCC affected by new developments

While Lutheran Church–Canada (LCC) is not an applicant in the District Group’s CCAA proceedings, it nevertheless stands to be affected by them. Most of the funds available to LCC come from voluntary donations made by LCC congregations. Congregations have historically remitted voluntary Mission Offerings to their District, which in turn passes on a portion of those offerings to LCC for national and international programming.

This programming is multi-faceted. On a national level, it includes subsidizing the training of pastors at LCC’s seminaries in Edmonton and St. Catharines; subsidizing the training of diaconal candidates at Concordia University College of Alberta; producing The Canadian Lutheran magazine and other communications; overseeing inter-church relationships and dialogues; and administering, credentialing, and providing professional support to military chaplains in the Canadians forces.

On an international level, LCC supports missionaries and theological education for Central America (Nicaragua, Honduras, and Costa Rica), Southeast Asia (Thailand and Cambodia), and Ukraine. LCC also participates in global social ministry relief programming through Canadian Lutheran World Relief, and participates in the work of the International Lutheran Council.

Historically, the ABC District has passed on “approximately 35% of the Donations received by the District on a monthly basis (40% on an annual basis)” to Lutheran Church–Canada, according to the Monitor’s report. However, the ABC District’s current financial situation has interrupted that regular transfer of funds from Alberta and British Columbia congregations to LCC, putting a strain on LCC’s national and international programming.

When the ABC District filed for CCAA protection at the end of January, the transfer of congregational remittances to LCC was frozen. According to the Monitor’s first report, the District has been unable to remit to LCC “approximately $115,157 for the pre-filing period from January 1 to 23, 2015.” Nor has the District been able to remit a percentage of congregational offerings received in the period since filing.

In its latest application to the Courts, the ABC District requested permission to pay the outstanding pre-filing contribution to LCC, as well as permission to provide 35% of congregational mission remittances going-forward to “support the intentions of the people who make mission remittances.” The Court-appointed Monitor noted that it was supportive of this action in its first report.

The Court did not grant this permission at the February 20 court meeting, choosing to adjourn discussion of these remittances until March 27. Lutheran Church–Canada’s executive officers will meet this week with LCC’s Board of Directors to consider the best approach to deal with these challenges.

Lutheran Church–Canada is monitoring the situation in the ABC District closely, reporting information as it becomes available. Catch up on all information previously published here: http://cdnlutheran.lutheranchurchcanada.ca/the-abc-district-situation/. The linked page will be updated as new information on the ABC District becomes available.

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