The Renin Group of companies has been granted protection under the Companies' Creditors Arrangement Act, "to preserve the company as a viable operation and preserve 300 jobs" Ontario Superior Court Justice Mesbur noted in her endorsement of its application for “immediate relief.”
The Renin Group is the parent corporation of Renin Corp., Renin Corp. US and Kingstar Products (Western Inc.) based in Brampton, Ontario. All three companies are named in the court’s order.
Renin is a leading manufacturer of closet doors, wall décor, system and hardware and fabricated glass. It has manufacturing and distributions centres in Concord and Brampton, Ontario; Vancouver, British Columbia; Tupelo, Mississippi; and London, England. The Group supplies a variety of products to the big box, home centre, distributor, OEM, fabricator, builder direct and specialty retail home improvement channels.
In its court filing, the Group said that its operations are sound, but that it has suffered from the impact of the recent cyclical downturn in the US housing industry. Renin and Renin US are in default of a 2007 credit agreement with five private lenders, described in their counsel's factum as “2nd Lien lenders.” The three applicant companies are at an impasse because one of these lenders has been unwilling to agree to a waiver and extension agreement pushing the maturity of their loans back by two years and continuing the paid-in-kind interest arrangements currently in place.
As of November 30, 2011, Renin and Renin US owed the 2nd Lien lenders more than $57 million. These loans are secured by a first ranking security against the debtors' fixed assets, some excluded cash assets, a pledge of Renin shares and a second ranking security against their working capital.
Four of the five lenders, who account for 80% of the value of the outstanding 2nd Lien loans, have agreed to the terms of a restructuring proposal presented by Renin, but the fifth has declined. On November 24, 2011 the fifth lender sent a demand letter requiring that the business be shut down and the assets liquidated, prompting the application for CCAA protection.
According to the applicants’ counsel, none of the other stakeholders favour a shutdown of the business. In fact, the applicants said that they would be in breach of their agreements with their primary lenders if they attempted to conduct an out-of-court sale process.
But their default on their 2nd Lien loans has triggered defaults on a credit agreement with their primary lenders who have declined to renew their credit agreement without a restructuring or refinancing of the businesses.
In granting the Renin companies immediate relief under the CCAA, the court also approved the appointment of FTI Consulting Canada Inc. as monitor of the proceedings.
The Court has granted an extension of the stay of proceedings up to March 31, 2012.