Ecolomondo: the fire test that pushed the bid deadline back a week

The complaints were about a smell. A representative of the province's Ministry of the Environment, Conservation and Parks told the monitor and its consultant that residents near Ecolomondo's tire-recycling plant in Hawkesbury, Ontario, had complained to him about odours coming from a municipal drainage ditch beside the plant, and that he had traced them to the plant. On the evening of August 22, 2026, the monitor, KPMG Inc., and its environmental consultant were told by telephone that the ministry, the Hawkesbury Fire Department, representatives of the City of Hawkesbury and an industrial cleaning company were on site, per the Third Report of the Monitor, Sept. 10, 2026, paras. 19–20.

What had happened, as the monitor understands it in consultation with the consultant, is that on August 21, "as a result of a fire test conducted at the Facility, copious amounts of water were flushed into the stormwater retention pond," and some of the odorous water in the pond was discharged into the ditch. The report does not describe the test further. KPMG calls the episode the Environmental Incident, and in its Third Report, filed September 10, it gives the incident as the reason the deadline for binding bids in the company's sale was extended by a week, leaving "insufficient time to finalize the APA for the court hearing scheduled on September 14, 2026," per the Third Report of the Monitor, Sept. 10, 2026, paras. 21, 35.

Ecolomondo Corporation, a Montréal company listed on the TSX Venture Exchange, and four related debtors have been under the CCAA in the Superior Court of Québec since May 21. When the case was reported here on June 1, the directors had resigned and KPMG had brought the stay extension itself. The June 22 orders, the August extension and the application now pending were likewise sought by the monitor, per the Application for an Order Extending the Stay Period, Aug. 18, 2026, paras. 7–8, 14 and the Third Report of the Monitor, Sept. 10, 2026, paras. 1, 3, 6–8. Export Development Canada, the secured creditor and interim lender, was owed $54,555,097 including accrued interest as of May 11, per the Pre-Filing Report of the Proposed Monitor, May 21, 2026, para. 46.

One line of three

The Hawkesbury plant was built to run three lines: one shredding used tires into rubber crumb, a thermal decomposition line converting the crumb in reactors into oil, gas and carbon black powder, and a carbon black line processing the powder into pellets or to customer specifications. By mid-June, after what it called a detailed review, the monitor understood the shredding line to be non-operational and in need of "significant capital expenditures." The decomposition line, it understood, required "considerable capital expenditures in order to be compliant with city of Hawkesbury ordinances," and its scrubbing media, which filter sulphur dioxide gas, needed replacing at a cost the monitor understood to be significant, with delivery from overseas expected to take more than two months. Continued operation of that line, the monitor wrote, "may present potential environmental risks," per the Second Report of the Monitor, June 19, 2026, para. 17.

On June 16 the monitor and the consultant told management that the decomposition line would go into care and maintenance, kept in a condition that would let operations resume if the sale produced a transaction; the line might also need to run periodically for demonstrations to prospective purchasers, per the Second Report of the Monitor, June 19, 2026, paras. 18–19. Only the carbon black line would keep going. The monitor's application explained the choice: running the other two lines "would entail material risk and capital expenditures which do not appear justified at this time," and "There are also questions as to how a purchaser in the SISP would view and value such capital expenditures," per the Application for a Second ARIO and SISP Order, June 18, 2026, paras. 12, 14. By August 18, twelve employees not needed under the care-and-maintenance plan had been temporarily laid off, and the monitor had issued notices of the stay of proceedings in respect of certain union grievances over the layoffs, per the Application for an Order Extending the Stay Period, Aug. 18, 2026, para. 9(f)–(g).

The June review also found the plant not compliant with certain environmental requirements, and the monitor authorized the disposal of hazardous material on the premises. It considered the quantity of rubber crumb on site a potential fire risk once the decomposition line stopped, and the company began selling the excess while keeping enough for demonstrations. At the monitor's instruction, management contacted the ministry and the City of Hawkesbury on June 16 to tell them about the proceedings, per the Second Report of the Monitor, June 19, 2026, paras. 22–27. By August 18, the monitor's application reports, it had completed the disposal of various environmental hazardous materials on the premises, per the Application for an Order Extending the Stay Period, Aug. 18, 2026, para. 9(h).

A bigger facility, and a lender outside the stay

On June 22 Justice Janet Michelin signed a second amended and restated initial order, and the court approved the sale process, per the Third Report of the Monitor, Sept. 10, 2026, para. 6. The stay ran to August 26; the monitor had asked for August 21, per the Second Amended and Restated Initial Order, June 22, 2026, para. 16 and the Second Report of the Monitor, June 19, 2026, para. 57. EDC's interim facility went from $300,000 to up to $2,500,000, at prime plus 7.5% with a commitment fee of 2.5% of each advance; the original facility, the monitor said on June 18, had not been drawn, per the Application for a Second ARIO and SISP Order, June 18, 2026, paras. 3, 22, 24.

The DIP charge rose to $3,000,000. Four employees the monitor considered critical to the sale were given a retention plan expected to pay $105,000 in two equal tranches, one after letters of intent came in and one on the closing of a transaction for substantially all the assets, secured by a KERP charge of $110,000; the plan's summary was filed under seal. The charges rank with the $300,000 administration charge first, the KERP charge second and the DIP charge third, per the Application for a Second ARIO and SISP Order, June 18, 2026, paras. 34–35, the Second Report of the Monitor, June 19, 2026, para. 31 and the Second Amended and Restated Initial Order, June 22, 2026, paras. 46, 49, 54–56.

The order also treats EDC as an unaffected creditor. Its claims under its credit and loan agreements are not to be affected, compromised or arranged under a plan or these proceedings, it is not subject to the stay, and it may enforce its security against the debtors' property on at least three business days' notice, per the Second Amended and Restated Initial Order, June 22, 2026, para. 20.

Eighty-six letters

The sale process ran in two phases, conducted by the monitor with KPMG Corporate Finance Inc. as SISP agent and in consultation with EDC, whose consent the procedures require both for choosing the letters of intent that go forward and for identifying the winning bid. Binding offers had to come with a cash deposit of at least 10% of the cash purchase price payable on closing, no break fee and no due diligence or financing condition, and any sale would be on an "as is, where is" basis. A present or past shareholder, director, officer or employee, or anyone related to one, intending to bid had to say so by noon on July 2, and would then be cut off from information about the conduct of the process, including the bids received. The procedures set a target closing date of October 7 and an outside date of October 22, 2026, per the SISP Order, June 22, 2026, SISP Procedures, paras. 19, 24, 26, 36, 38–39.