San Industries: mills sold, then bankruptcy to release a $1.8 million holdback

The San Group had been producing lumber since 1979, along a line that ran across British Columbia. Contractors harvested the timber, a sawmill in Port Alberni broke it down, remanufacturing plants turned it into finished product, and the group sold to builders and developers, individual consumers, and Indigenous groups and nations, with the United States as its primary export market. San Industries Ltd. owned the product from harvest to sale, and its subsidiary Coulson Manufacturing 2017 Ltd. ran the sawmill, which employed about 100 people, per the First Affidavit of Sukhjit Singh Sanghera, Nov. 27, 2024, paras. 4, 8, 10, 148. The plants in Port Alberni and Langley made siding, soffits, decking, fencing and cladding, per the First Report of the Monitor, Dec. 7, 2024, paras. 14, 18.

The affidavit that opened the case, sworn on November 27, 2024 by one of the group's three founders, gives the company's account of how the line stopped. Lumber prices had been falling since early 2022 while labour costs and interest rates climbed. In June 2023 a wildfire closed Highway 4, "the only highway that connects the island's two coasts," per the First Affidavit of Sukhjit Singh Sanghera, Nov. 27, 2024, para. 97. For most of that summer the group moved lumber out of Port Alberni over an old logging road at a fraction of its usual volume, and in July a 13-day port strike held its cargo. On April 7, 2024 the Acorn sawmill in Delta caught fire. The Province took the position that Coulson owed about $22,000,000 in stumpage and obtained two judgments against it, and on October 17, 2024 the group temporarily shut its Port Alberni sawmill and remanufacturing plant, per the First Affidavit of Sukhjit Singh Sanghera, Nov. 27, 2024, paras. 86–87, 93–108.

RBC made demand on October 25, 2024 and BDC on November 7, and between them the two banks were owed more than $150.0 million, per the First Report of the Monitor, Dec. 7, 2024, paras. 24–25, 41. On November 29, Justice Stephens of the Supreme Court of British Columbia granted an initial order for San Industries and 15 related companies, appointing Deloitte Restructuring Inc. as monitor, staying proceedings to December 9 and authorizing $600,000 of interim financing from RBC, per the First Report of the Monitor, Dec. 7, 2024, para. 2. "Current ownership and management intend to participate as a bidder in the SISP," the affidavit said, and the petitioners asked for expanded monitor powers "to implement the SISP and ensure an open and fair process," per the First Affidavit of Sukhjit Singh Sanghera, Nov. 27, 2024, para. 142.

By September 2, 2026, the mill, both plants and a farm had been sold, RBC and BDC had received $21.7 million on account of their security, and Deloitte was writing to creditors as licensed insolvency trustee of San Industries and Coulson, both assigned into bankruptcy on August 19, 2026. The trustee puts the lenders' shortfall at more than $129.0 million and does not expect any distribution to unsecured creditors of either company, per the Trustee's Preliminary Report (San Industries Ltd.), Sept. 2, 2026, paras. 6, 42–43 and the Trustee's Preliminary Report (Coulson), Sept. 2, 2026, paras. 6, 36–37.

The monitor takes the accounts

Deloitte had been RBC's financial adviser since February 2024. Eight days into the case, its first report set out a list of concerns: a write-down of about $20.0 million in log and lumber inventory at September 30, 2024, whose timing management had not clearly explained; about $6.0 million of logs that management reported swept from their booms outside the Coulson mill in a November storm; and a Bank of Nova Scotia account, opened in May 2024, into which about $11.7 million of receivables had been deposited, and which RBC advised was opened in breach of its credit facilities. On that record the monitor would not support the stay extension to January 10, 2025 that the petitioners sought, per the First Report of the Monitor, Dec. 7, 2024, paras. 31, 36–37, 50–52, 68–70. Its second report added that RBC would advance no further interim financing unless the monitor received further enhanced powers, which it described as including power to operate the business and sell the property in the petitioners' name, and ran the sale process itself, per the Second Report of the Monitor, Dec. 18, 2024, paras. 79, 83. The court granted those powers on December 19, 2024, per the Eleventh Report of the Monitor, Feb. 19, 2026, para. 4.

In January the monitor reported on the logs. Several parties with knowledge of log activity in the area had told it, variously, that they had seen no evidence of the logs, had not been told of any loss, or "did not believe Coulson would have had this quantum of logs at the time of the storm," and the monitor decided to spend no further time or resources on the matter, per the Third Report of the Monitor, Jan. 13, 2025, paras. 38–39. Management was terminated on or about January 31, 2025, per the Fourth Report of the Monitor, Feb. 3, 2025, para. 15. The monitor ceased all operations that day; when the case began, about 256 people had worked at the group's four sites, per the Fifth Report of the Monitor, Feb. 18, 2025, paras. 60, 68(b).

Sold in lots, priced under seal

The sale process approved on January 16, 2025 produced 29 signed confidentiality agreements from a list of 75 potential bidders. Letters of intent for the Langley plant and the neighbouring Langley farm were unsatisfactory against appraised values, in the monitor's view, so both went to Cushman & Wakefield ULC for listing. Three agreements followed, each filed with its price, deposit and allocation redacted, and the monitor's summary of the offers was sealed until closing. The Fraserview Cedar Partnership, a Surrey manufacturer since 1994, agreed to buy the Coulson mill and to offer the unionized employees work as successor employer under their collective agreement. A newly incorporated 1537037 B.C. Ltd. agreed to buy the San Forest Products plant in Port Alberni, to lease to IGV Housing Limited for prefabricated affordable housing, and Cedarline Industries Ltd., a Surrey maker of Western Red Cedar products, agreed to buy the Langley plant, its land and buildings from Axon Lumber Ltd. and its equipment from San Industries, per the Seventh Report of the Monitor, June 4, 2025, paras. 23–24, 34–36, 41, 47–48, 58, 60–61, 64, 72–73.

Justice Stephens approved all three on June 12, 2025, and the Coulson assets vested in 1534987 B.C. Ltd., a newly incorporated company related to the purchasers, per the Approval and Vesting Order (Coulson Mill), June 12, 2025, para. 5. Once the deals closed, the monitor reported the proceeds. Coulson closed June 20, bringing in $12,064,218 net of a $30,275 commission. The Langley plant closed July 15 and brought in $12,373,565, after commissions, $300,441 in tax and utility arrears and GST on the equipment. The San Forest plant closed on July 29, after three extensions to let the buyer finish its financing, with proceeds of $8,254,806 net of $1,319,994 in arrears, a commission and GST, plus $475,000 in extension fees; the remaining inventory netted $1,178,584, per the Ninth Report of the Monitor, Aug. 27, 2025, paras. 32–40.

Best and final on the farm

On October 15, 2025 the monitor agreed to sell the Langley farm to Cattermole Storage Ltd., a developer of warehouses and storage units, for $2,300,000, per the Tenth Report of the Monitor, Oct. 22, 2025, paras. 43–46. Three higher bids arrived the day before the approval hearing. On October 29 the court directed best-and-final offers by noon the next day and adjourned to November 3, and of the five that came in, Martini Farms Ltd. offered the most: $3,010,000, which the monitor called "only marginally lower" than BC Assessment's valuation of $3.15 million, per the Second Supplement to the Tenth Report of the Monitor, Nov. 3, 2025, paras. 11–16, 20–21. Justice Stephens approved that sale on November 3, and it closed November 18 for $2,931,844 net, per the Eleventh Report of the Monitor, Feb. 19, 2026, para. 21.

Why two of sixteen

On October 29, 2025 the court directed a first interim distribution of $16,622,816 to RBC and $5,121,353 to BDC. The same order authorized further payments of up to $910,171 to RBC and $919,085 to BDC "following the assignment" of San Industries and Coulson "into bankruptcy," and declared that no distribution under it would be a preference, transfer at undervalue or other reviewable transaction as against the monitor and the recipient, per the Order Made After Application (Interim Distribution), Oct. 29, 2025, paras. 1–2, 5.

In its tenth report the monitor had explained that once the two companies were assigned, deemed trust and lien claims against them would no longer retain priority under s. 67(2) of the Bankruptcy and Insolvency Act. The largest was the Province's stumpage claim of about $17.6 million, a lien under s. 131 of the Forest Act supported by registrations filed in September and November 2024, after the lenders' security, and applied against both companies. The monitor understood it might attach to about $1.2 million of inventory proceeds. With GST and WorkSafeBC claims added, it held back $1.8 million, to be paid to the lenders after the assignments. Axon would not be assigned: its only realizations were land and buildings under an RBC mortgage registered and advanced before its GST liability arose, per the Tenth Report of the Monitor, Oct. 22, 2025, paras. 66–71.

The fire insurance claims went to the lenders directly. After the insurers denied the Acorn fire business interruption and equipment claims and voided the policies from inception, the monitor told the court that the lenders, owed in excess of $129 million, were the only economic stakeholders in the insurance claims apart from a CRA deemed trust claim against Acorn, per the Eleventh Report of the Monitor, Feb. 19, 2026, paras. 37, 46. On February 25, 2026 the court assigned the fire claims, and the related claims against brokers, to BDC and RBC, per the Order Made After Application (Insurance Claims Assignment), Feb. 25, 2026, paras. 2, 7.

Investigating related-party transactions, the monitor traced 22 transfers totalling $4.1 million from San Industries and other petitioners to Arrowview Estates Development Limited Partnership and its general partner, entities related to the group through common directors and beneficial ownership. Those transfers made up 64.5% of the purchase price of three parcels of land in Port Alberni, and 24 more totalled $1.2 million, with no documented agreement, bona fide business purpose or consideration the monitor was aware of. The claim the monitor filed on April 14, 2025, on behalf of San Industries and other petitioners, against Arrowview and the three founders alleged, among other things, breach of fiduciary duty and conversion, and it settled, with the settlement secured by a second-ranking mortgage on the lands. Arrowview did not comply with the settlement, and the first mortgagee started foreclosure. On April 29, 2026 the monitor obtained conduct of sale. The trustee calls any recovery uncertain and expects it to go entirely to the lenders, per the Trustee's Preliminary Report (San Industries Ltd.), Sept. 2, 2026, paras. 29, 45–47.

The trustee's first report

The creditor letters of August 20, 2026 carry the same line: "there are no unencumbered assets of the Debtor available for distribution to unsecured creditors, and the Trustee does not anticipate any recovery to creditors in the Debtor's bankruptcy estate." The first meetings are set for September 4, 2026 by Microsoft Teams, at 3:00 p.m. Pacific for San Industries and 3:45 p.m. for Coulson, to affirm the trustee or substitute another and appoint inspectors, per the Creditor Package (San Industries Ltd.), Aug. 20, 2026, p. 1 and the Creditor Package (Coulson), Aug. 20, 2026, p. 1.

For San Industries, the preliminary report says substantially all assets were realized in the CCAA. The monitor holds about $1.6 million attributable to the company, to be applied first to the remaining costs of that proceeding and then, subject to court order, to the lenders. Its shares in San Holdings Inc. are not expected to have realizable value. About $2.0 million of the first distribution came from its assets, over which RBC holds a first-priority charge. The statement of affairs lists 139 unsecured creditors with $89,688,787.50 in claims, and four proofs of claim totalling $83,383,319 had arrived when the report was finalized, per the Trustee's Preliminary Report (San Industries Ltd.), Sept. 2, 2026, paras. 24, 27–28, 35, 41–42.

At filing, Coulson had about 84 unionized employees in United Steelworkers Local 1-1937; they were laid off, and the going-concern sale provided for the purchaser to offer them continued employment. About $6.8 million of the first distribution came from Coulson's assets, and the monitor still holds about $1.5 million attributable to it. Stumpage arrears of about $15.9 million, GST of about $435,000 and WorkSafeBC premiums of about $33,000 lose their priority in the bankruptcy. The trustee also knows of a claim for union dues deducted from wages and never remitted; with no statutory priority it is aware of, and the funds not held in trust, its preliminary view is that the claim ranks as unsecured. The statement of affairs lists 77 unsecured creditors with $145,788,481.32 in claims, and one proof of claim, for $87,572,878, had been received when the report was finalized, per the Trustee's Preliminary Report (Coulson), Sept. 2, 2026, paras. 17, 27, 32–33, 35–36.

Each estate runs on a $15,000 deposit advanced from the CCAA, from RBC for San Industries and from BDC for Coulson. Both reports list the matters the monitor investigated, among them the write-down, the reported loss of logs, an undisclosed bank account, a circular custom-cut arrangement and related-party transactions, pursued as far as it considered appropriate and feasible given cost and likely recovery, per the Trustee's Preliminary Report (San Industries Ltd.), Sept. 2, 2026, paras. 44, 48–49. "There is no funding available to the Trustee to pursue further investigation or litigation of these matters," the Coulson report says, and the trustee is not aware of any preferences or transfers at undervalue by Coulson that would be recoverable for the estate, per the Trustee's Preliminary Report (Coulson), Sept. 2, 2026, paras. 38–41. In the CCAA itself, the stay runs to September 30, 2026, per the Order Made After Application (Stay Extension), Feb. 25, 2026, para. 2.