BA Energy became the first oilsands casualty of the world-wide economic slowdown, after the company filed for bankruptcy protection.
BA Energy became the first oilsands casualty of the world-wide economic slowdown, after the company filed for bankruptcy protection.
The company and its parent company, Value Creation Inc. (VCI), is struggling to stay afloat after halting construction on a massive upgrader project.
“BA is suffering from a cash flow shortage and as such will be unable to repay a loan of approximately $50-million plus interest to VCI due Dec. 31, 2008,” said BA chairman and CEO Columba Yeung in an affidavit filed Dec. 29 with the Alberta Court of Queen’s Bench.
According to the document posted on the website of Ernst & Young Inc, which is acting as the monitor for BA’s restructuring under the Companies’ Creditors Arrangement Act (Canada) (CCAA), the failure to repay the loan may place VCI in default of its main credit facility.
Yeung blamed falling oil prices and the credit crisis for BA’s need to file for court protection.
In the affidavit, Yeung said his restructuring plan is based on the amalgamation of BA and Value Creation.
If this plan is not approved, the alternative is a sale of BA assets and possibly some of VCI assets at far below market value.
The two companies have more than $768-million in assets and BA Energy has a tax pool of more than $588-million, while VCI has $190 million cash on hand.
The company was established to engage in upgrading bitumen and heavy oil into high quality crude oil in Alberta.
However, its plans hit a snag when work halted on the $4 billion Heartland Upgrader near Edmonton.
The project was under construction and partially completed, when BA quietly shut it down in September.
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