Novo Plastics: the consent to receivership came due

Novo Plastics started in 2006 with one employee besides its founder, in leased space in an industrial building near Major Mackenzie Drive and Highway 404 in Markham. A year later a related company, 2139654 Ontario Limited, bought the building for $7.1 million, and Novo has worked out of the 84,000-square-foot plant at 388 Markland Street ever since, designing and moulding plastic components and assemblies by injection and blow moulding for automotive, consumer and commercial, food and beverage, industrial and sustainable-packaging customers. Its founder, Baljit Sierra, the president and sole director of both companies, swears that it now employs over 100 people, counting part-time and flex staff, and that at the beginning of 2025 about 90 per cent of its business was with customers in the United States, per the Affidavit of Baljit Sierra, Sept. 14, 2026, paras. 4, 6–7, 9–10. Its reviewed statements for the year to March 31, 2025 show sales of $19,198,348 and a net loss of $294,914, per the Affidavit of Baljit Sierra, Sept. 14, 2026, Ex. 1, Statement of Operations.

On September 15, 2026, Justice F.L. Myers of the Ontario Superior Court of Justice (Commercial List) appointed Deloitte Restructuring Inc. receiver of both companies on the application of The Toronto-Dominion Bank under s. 243(1) of the BIA and s. 101 of the Courts of Justice Act, court file CL-26-00000153-0000, per the Order Appointing Receiver, Sept. 15, 2026, paras. 1–2. The debtors had asked for 60 more days to close a sale of the plant. The endorsement refusing them opens: "I have previously written that it is a short term and often self-defeating strategy to take an adversarial position with one's secured lender," per the Endorsement of Justice Myers, Sept. 15, 2026, para. 1.

Tariffs, a bank and fifteen months since demand

The debtors' account of the decline runs through their lender and through Washington. In January 2023 the land company moved its mortgage to TD from Royal Bank of Canada and Bank of Montreal because TD offered better terms, and in December 2023 Novo's operating facility was consolidated with that mortgage. Mr. Sierra says the relationship first strained at the end of 2024, when TD would not let Novo draw on a capital expenditure facility for used equipment and moulds. Then came the change in U.S. trade policy in 2025: one American customer moved its moulds to a U.S. plant to reduce its tariff exposure, others did the same, and sales fell. Persistent overages on the operating line put the account in TD's Financial Restructuring department in March 2025, per the Affidavit of Baljit Sierra, Sept. 14, 2026, paras. 12–14, 18. Management answered with cost controls, a turn toward Canadian and other international customers, and new lines in Blue Box recycling infrastructure and sustainable packaging, per the Affidavit of Baljit Sierra, Sept. 14, 2026, para. 19.

The bank's account, sworn in April by a director in its Financial Restructuring Group (the TD Affidavit), is a schedule of defaults. Default letters of May and June 2025 recorded a debt service coverage ratio of 0.75x against a required 120 per cent for the period ending March 31, 2025, borrowing-base failures in eight monthly tests with a shortfall of $1,080,000 at April 30, 2025, and $499,704.42 in payment arrears for May 2025. TD demanded payment on June 19, 2025 and signed a forbearance agreement with the debtors and Mr. Sierra the same day, requiring a signed refinancing commitment by July 15 and running to August 15, 2025. At that point CAD $28,423,264.25 and USD $305,971.05 were owing, per the TD Affidavit, Apr. 10, 2026, paras. 13–18. No commitment arrived, the forbearance lapsed, fresh demands and notices under s. 244(1) of the BIA went out on August 27, 2025, and TD then received from a creditor a notice of garnishment dated September 18, 2025 for $71,968.35, per the TD Affidavit, Apr. 10, 2026, paras. 19–24.

TD issued its first receivership application on October 1, 2025. The debtors had a Bank of Montreal mortgage commitment by October 7, and TD extended the forbearance to November 15, 2025 and abandoned the application, on terms that preserved its right to bring it again, per the Affidavit of Baljit Sierra, Sept. 14, 2026, paras. 15–17 and the TD Affidavit, Apr. 10, 2026, paras. 29–32. A payout letter TD provided in December went unused, and by January 2026 the BMO refinancing was off, per the TD Affidavit, Apr. 10, 2026, paras. 34–35. TD issued this application on April 9, 2026, per the Factum of the Applicant, Sept. 4, 2026, para. 43.

What is owed, and against what

TD's security is a $26,500,000 charge on the Markland Street property registered January 10, 2023, general security agreements from both companies dated January 6, 2022, a specific assignment of the land company's lease to Novo, and unlimited cross-guarantees between the two debtors; Mr. Sierra's own guarantee is limited to $1,500,000 plus interest and costs. TD is the only charge on title, and its registrations are the only all-asset registrations among 32 registration families against the debtors under the Personal Property Security Act, per the TD Affidavit, Apr. 10, 2026, paras. 9–12 and n. 1.

At August 31, 2026, exclusive of accruing interest and costs, the debtors owed CAD $30,562,992.33 plus USD $300,436.55. The largest piece is a term facility of the land company at $21,458,743.65; Novo's Canadian-dollar operating line stood at $5,487,126.12, and the land company's account carried an unauthorized overdraft of $353,712.09. TD had received no payment at all, per the Supplementary TD Affidavit, Sept. 1, 2026, paras. 9–10.

The ways out

Through a financing broker, the debtors signed a term sheet with Farm Credit Canada for a $27,000,000 credit facility on March 4, 2026, and one with Pathward for a $5,000,000 receivables facility on April 17; FCC's due diligence was slowed, Mr. Sierra says, by its concern about Novo's tariff exposure, and an FCC representative wrote on August 17 that approval was imminent. A January 29, 2026 application to FedDev Ontario for tariff relief remains active. And on September 10, 2026, the debtors obtained a mortgage commitment from X Capital Real Estate & Mortgage Fund for $34,450,000, which Mr. Sierra says could close within the same 60 days, per the Affidavit of Baljit Sierra, Sept. 14, 2026, paras. 20–24.

The route that came closest was the plant. On May 21, 2026, the land company agreed to sell 388 Markland Street to Tradegents Ltd. for $33,000,000, with a $330,000 deposit and Novo to lease the building back. Closing was set for June 25. The buyer wanted the roof repaired first; an amendment on June 24 moved closing to July 15, and a second on August 10 moved it to September 4, per the Affidavit of Baljit Sierra, Sept. 14, 2026, paras. 25–27.

TD's application was returnable July 15. The debtors asked for three weeks; on July 14 TD's counsel wrote that the bank would extend the payout date to August 31, 2026 if it had, before noon that Friday, an executed consent to the receivership order as drafted. "That gives 6+ weeks rather than the 3 needed, and no need for drafting any responding materials," per the Affidavit of Baljit Sierra, Sept. 14, 2026, Ex. 14, email of July 14, 2026. Both companies signed on July 17, per the Supplementary TD Affidavit, Sept. 1, 2026, paras. 3–5. Mr. Sierra says he agreed because he expected the roof to be finished by mid-August, per the Affidavit of Baljit Sierra, Sept. 14, 2026, para. 29.