Scierie St-Michel: the interim loan dropped at the hearing

Two plants in Saint-Michel-des-Saints, in Lanaudière, are at the centre of this file. The first is a sawmill whose operator, Scierie St-Michel Inc., told the court in June that it runs "one of the most eco-responsible sawmills in eastern Canada" [translation], per its Application for an Extension of the Stay, June 18, 2026, para. 1. The second belongs to SSTM Valorisation du bois Inc., which turns sawdust residue into wood pellets, and Scierie supplies it with wood, as Justice Patrick Ouellet noted in June, per the Minutes and Judgment of June 2, 2026, p. 2. Valorisation was incorporated on July 31, 2025, when the group decided to split sawing and planing, forest operations and wood valorization into three companies, and it began producing pellets in September 2025, per the Fourth Report of the Trustee, Sept. 2, 2026, paras. 10–12 and the First Report of the Trustee, June 22, 2026, para. 13. The trustee counts about 91 employees at the two debtors, 51 at the sawmill and its offices and 40 at the pellet plant, in a group that normally runs with 345 when every operation works full time. The sawmill has been shut since the construction holiday began on July 19, a halt since extended to September 27; at Valorisation, management halted operations on August 5 until September 5, with a gradual restart expected in the following weeks; both companies keep the staff needed to secure their sites, per the Fourth Report of the Trustee, Sept. 2, 2026, paras. 15, 36–38.

Both companies filed notices of intention to make a proposal under the Bankruptcy and Insolvency Act on May 26, 2026, with Ernst & Young Inc. as trustee. The trustee lists what came before: volatile lumber prices, countervailing and customs duties, a fire in the dryer in January 2025 that cut production capacity by 35 per cent, a temporary production halt planned in August 2025, and a gradual restart of the sawmill on May 11, 2026, at two shifts a week, per the Fourth Report of the Trustee, Sept. 2, 2026, paras. 16–19, 24. The debtors' own applications put the weight on "the customs tariffs imposed on this industry by the American administration" [translation], per the Application for a Fourth Extension, Sept. 1, 2026, para. 3.

Forty-five days, then fourteen

On August 19 the debtors applied for a third extension of the stay, 45 days to October 5, and for more money. Caisse Desjardins du Nord de Lanaudière, whose $1,395,000 facility to Scierie was already in place, would lend it $1,417,000 more, for a total of $2,812,000, and its court-ordered charge on Scierie's assets would grow by $1,700,400 to $3,374,400. SSTM International Inc., Valorisation's sole shareholder and the second interim lender, would add $52,500 to its $163,700 facility, again with no charge, per the Application for a Third Extension, Aug. 19, 2026, paras. 17, 29, 39. The Desjardins advance had two purposes. One part, $300,000, would cover the deficit forecast over the next 45 days; $1,117,000 would cover a "margining deficit" [translation] that the application says would follow the sale, in the coming weeks, of Scierie's lumber inventory, over which Desjardins holds security tied to its line of credit. Covering it, the application adds, would reduce Scierie's debt under that line by the same amount. Discussions with neither lender were final when the application was served, per the Application for a Third Extension, Aug. 19, 2026, paras. 28, 32–33, 38.

The extension section of the trustee's Third Report, dated the next day, describes a smaller request: a further 14 days, to September 4, so that EY-Parthenon could pursue the final phase of the sale process, analyse the offers with the companies and the secured creditors, and work toward a transaction or other restructuring measures. Its three-week cash-flow forecast to September 5 assumed no additional interim financing, with the sawmill idle and Valorisation limited to producing chips for a single customer, and showed the debtors able to fund those weeks from cash on hand, per the Third Report of the Trustee, Aug. 20, 2026, paras. 33–34, 40–41.

The hearing on August 21 ran from 9:20 to 9:30 before Registrar Alexandra Cartier. Debtors' counsel handed up a draft judgment, the minutes record "no contestation of the application for an extension of time" [translation], and the registrar signed the judgment from the bench, per the Minutes of the August 21, 2026 Hearing, pp. 1–2. The order recites "the amendments to the Application made orally by the Debtors at the hearing following the latest developments in the file" [translation], extends the time to file a proposal by 14 days, to September 4 inclusive, and says nothing about financing, per the Order Extending the Stay of Proceedings, Aug. 21, 2026, pp. 2–3, para. [5]. A companion judgment, made with Royal Bank of Canada's consent, renewed the safeguard order that lets Valorisation use equipment RBC owns, to September 4 at 5 p.m., after an oral amendment to the duration; Valorisation's application had asked for October 5, per the Judgment on the Third Request to Renew a Safeguard Order, Aug. 21, 2026, paras. [2]–[5] and the Third Application to Renew a Safeguard Order, Aug. 19, 2026, concl. [E].

The debtors gave their reason in the next application. The August 19 request was cut back at the hearing, they say, because "it was agreed among the parties that it was more appropriate to try to conclude quickly the discussions then under way to determine the next steps, and thereby again avoid resorting to interim financing in the meantime, which would have had the effect of increasing the priority debt to be repaid under an eventual proposal" [translation], per the Application for a Fourth Extension, Sept. 1, 2026, paras. 16–18. The word "again" points back to August 6, when Registrar Joanie Nadeau granted a short stay to August 21 and raised the administration charge from $250,000 to $600,000 so the companies could avoid new interim financing, the professionals having agreed to defer payment of their fees, per the same Application for a Fourth Extension, Sept. 1, 2026, paras. 12–13 and the Second Report of the Trustee, Aug. 5, 2026, para. 39.

Three ways in, and an unsolicited offer

The sale and investment solicitation process started on or about June 19, run by the debtors and SSTM International with EY-Parthenon Financement d'entreprise Inc., an entity related to the trustee, as adviser, per the Application for a Fourth Extension, Sept. 1, 2026, paras. 10, 22. Non-binding offers came in by a deadline pushed from July 6 to July 9, and binding offers by July 29. On August 4, EY-Parthenon told the bidders that "no binding offer was judged satisfactory" [translation] and gave every bidder that had submitted one "a last and final opportunity to present their best offer" [translation]: a revised, final binding offer, due August 14, for one or more of an equity investment in SSTM International under management's plan, the purchase of Scierie's assets, or the purchase of Valorisation's assets, per the Fourth Report of the Trustee, Sept. 2, 2026, paras. 26–30.

Offers were received, and the trustee's September 2 report adds that an unsolicited offer was received during the extension period and is being analysed, and that "as of the date of this report, no offer has been rejected" [translation]; a separate application will seek approval of a transaction, a proposal or another restructuring measure once the next steps are set, per the Fourth Report of the Trustee, Sept. 2, 2026, para. 31. The reports name no bidder and give no price. From the start, the First Report framed the process around SSTM International attracting new investors or raising its own share capital so that it could fund or support the proposals the debtors would make to their creditors, per the First Report of the Trustee, June 22, 2026, paras. 42–44.

The fourth application

On September 1 the debtors asked for 21 more days, to September 25, and for an increase in principal "of an amount to be determined" [translation] in SSTM International's facility to Valorisation, the figure to follow from the forecasts attached to the trustee's next report. The Desjardins request did not return. The debtors say they may come back before September 25 to present their plan for what follows, seek the extension needed to proceed with a transaction and a viable proposal, and "likely" have "a suitable solution as to the financing required in the interim" [translation] approved, per the Application for a Fourth Extension, Sept. 1, 2026, paras. 19–20, 25, 31.

The Fourth Report supplies the number. In the two weeks to August 30, Scierie's net cash flow was $169,816 against a budgeted outflow of $71,709, a favourable variance of $241,525 that left it with $333,907 in cash. Valorisation closed at $87,669. The trustee puts Scierie's variance down mainly to limited operating spending, the shutdown, deferred forest operations and deferred professional fees, per the Fourth Report of the Trustee, Sept. 2, 2026, para. 40, App. A, p. 11. For the four weeks to September 27, Scierie expects to fund itself from cash, with $175,000 of receipts attributed mainly to the residual balance of a lumber sale, and to end the period with $4,747. Valorisation, restarting pellet and chip production gradually, with receipts from Cargo Trade for pellets and from Domtar for hardwood chips, forecasts a net outflow of $365,519, including $137,972 of professional fees, and needs $284,500, which SSTM International has confirmed it has the cash to lend. "No financing charge will be attached to this financing" [translation], the trustee writes, per the Fourth Report of the Trustee, Sept. 2, 2026, paras. 41–43, 47, App. B, pp. 14–16.

The term sheet, dated September 2, is for a non-revolving facility of up to $284,500 at 12 per cent a year, paid monthly, with a one-time fee of $7,500. Valorisation must deliver a variance report every Wednesday from September 9, certified by its president, and may not run an adverse variance above 10 per cent of cumulative forecast disbursements without the lender's consent. The loan is repayable on the earliest of an enforceable judgment authorizing the sale of Valorisation's assets or the completion of a transaction under the sale process, a date the court fixes, and November 25, 2026, which the term sheet describes as the end of the maximum period for filing a proposal, per the Application for a Fourth Extension, Sept. 1, 2026, Ex. R-2, ss. 3, 5, 7, 8, 10. The draft order would cap SSTM International's unpaid principal to Valorisation at $448,200, per the Application for a Fourth Extension, Sept. 1, 2026, Ex. R-1, para. [6].

The debt that a proposal would have to address is set out in the First Report's unaudited balance sheets at March 31, 2026. Scierie showed $26,118,000 of assets against $35,759,000 of liabilities, including $12.7 million of trade payables, 94.2 per cent of them more than 90 days old, and a Desjardins line of credit with no borrowing capacity left. Valorisation's $23.1 million of equipment financing came mainly from related parties, $13.0 million from SSTM International and $8.7 million from JECC Mécanique Ltée; SSTM International had also advanced it $2.7 million short-term. Investissement Québec's term loans stood at $7.7 million and Desjardins's at $5.5 million, $4.5 million of it advanced in April 2026 under a forestry support program guaranteed in full by the Business Development Bank of Canada, per the First Report of the Trustee, June 22, 2026, pp. 4–6. Desjardins and Investissement Québec are the principal secured creditors of both companies, with first- and second-ranking hypothecs on the universality of their property; as of September 2 the trustee was still awaiting its independent security opinion from Osler, per the Fourth Report of the Trustee, Sept. 2, 2026, paras. 20–22.

RBC's equipment

Royal Bank of Canada had leased equipment to Scierie, and some of it sits in Valorisation's plant. On May 15 RBC obtained a seizure before judgment over leased equipment in payment default at both plants; on May 19 the bailiff sealed it and removed parts so it could not run, and Valorisation's operations stopped entirely, per the First Report of the Trustee, June 22, 2026, paras. 23–25. At a contested hearing on June 2, Justice Patrick Ouellet recorded that the leases were signed in 2023, before Valorisation existed, and that RBC refused Valorisation's offer to pay the arrears. "Here, SSTM's apparent right is not obvious at first glance" [translation], he wrote, since Valorisation is not a party to the leases, but insolvency law holds "robust mechanisms" [translation] for assigning contracts over a counterparty's objection, and the claim was neither frivolous nor vexatious. He ordered the equipment returned on payment of $148,625.03 in arrears, with current payments as they fell due and a $60,000 first-ranking critical-supplier charge. He limited the order to 60 days, the court being "not comfortable issuing an order for a period of six (6) months given the embryonic state of the proceedings" [translation], per the Minutes and Judgment of June 2, 2026, pp. 2–5. Scierie reached its own agreement with RBC on July 4, and the seals came off its equipment on July 29, per the Fourth Report of the Trustee, Sept. 2, 2026, para. 34.

Valorisation's order has since been renewed three times, to August 13, August 21 and September 4, each with RBC's consent. Its fourth application, filed September 1, asks for September 25 at 5 p.m. The equipment, it says, could be acquired by a future investor or the leases assigned, and without the order "RBC will be free to assert its ownership rights over the equipment and thereby likely defeat the restructuring efforts without delay" [translation], per the Fourth Application to Renew a Safeguard Order, Sept. 1, 2026, paras. 12–17, 39–40.

Both applications are to be presented at 9 a.m. on September 3, in room 2.00 of the Joliette courthouse, per the Application for a Fourth Extension, Sept. 1, 2026, notice of presentation, p. 9 and the Fourth Application to Renew a Safeguard Order, Sept. 1, 2026, notice of presentation, p. 10. The trustee supports the 21 days as time to complete the analysis of the offers and set the terms of a transaction or other restructuring measures, and says no creditor would suffer serious prejudice, per the Fourth Report of the Trustee, Sept. 2, 2026, paras. 49, 52–53.