Teal Jones: five years of losses on TFL 46

Tree Farm Licence 46 has changed hands twice before, and each time the forest came with an obligation attached. In 1993 Fletcher Challenge sold the licence to TimberWest, and as an express condition TimberWest agreed to keep Fletcher Challenge's mills supplied with logs and chips from it. In 2004 TimberWest sold it to Teal, and to keep meeting those obligations it required Teal, as a condition of that sale, to sign a set of log, cedar log and chip supply agreements. "Each successive sale of TFL 46 was structured and priced on the basis that the successor owner of TFL 46 would assume the obligation to supply chips and residuals to Domtar," the TimberWest affiant, Nick Broekhuizen, deposes, per the Affidavit #2 of Nick Broekhuizen, Sept. 1, 2026, paras. 8–10. The chips go to Domtar Inc., successor to NorskeCanada, which signed the 2004 contracts with Teal, per the Amended Notice of Application, Sept. 1, 2026, Part 3, para. 24.

The third sale, to Gillfor Manufacturing Inc., is structured the other way. When the court last saw this case, on the eve of the September 8 and 9 hearing, the fight was over whether a reverse vesting order could leave behind the silviculture and road obligations the Forest Act attaches to the licence; the buyer had agreed to take those on. The supply contracts are a separate question, and they are on the list of excluded contracts bound for ResidualCo.

The price, and what the monitor says it requires

The share purchase agreement, as amended through seven amendments, sets the price for the Teal Jones shares at $115,250,000, adjusted for receivables, inventory and real estate; Gillfor has paid a $7,500,000 deposit to the monitor in trust. The amount of the price allocated to TFL 46 is blank in the redacted copy, per the Redacted Share Purchase Agreement (Consolidated), ss. 2.2, 2.4(a).

The monitor's application is direct about the contracts. The approval and reverse vesting order "will effectively terminate certain Supply Contracts between Domtar, TimberWest and the Group. This is unfortunate, but it is also necessary to complete the Surrey Transaction." The transfer to ResidualCo is a condition precedent for Gillfor, and "Neither the Monitor nor the Court can force the Surrey Buyer to complete the Surrey Transaction without a transfer of the Supply Contracts." The contracts at issue are two with Domtar — a pulplog supply agreement of May 5, 2004 and a chip supply agreement of July 1, 2004 — and three with TimberWest, all dated May 6, 2004, per the Amended Notice of Application, Sept. 1, 2026, Part 3, paras. 19, 22, 24–25.

Domtar and TimberWest say the contracts are interests in land that cannot be vested off; the monitor answers that "They are private, bilateral commercial agreements," and that even an interest in land could be extinguished to achieve the purposes of the CCAA. It leans on Quest University Canada (Re), 2020 BCSC 1883, in which one going-concern offer required vesting off contracts alleged to be interests in land. Both counterparties, it says, could have bid in the sale process and did not. "There is no allegation – let alone evidence – that the process was unfair or that a better outcome is (or should have been) available. TimberWest and Domtar simply do not like the outcome," per the Amended Notice of Application, Sept. 1, 2026, Part 3, paras. 29, 33, 35–40. The same document says the other offers received in the sale process "did not represent viable alternatives, including because of the amount of consideration offered."

A mill at Port Mellon

Domtar's answer came in an affidavit sworn on the first day of the hearing by Chris Stagg, its vice-president of fibre supply. The terms that matter to Domtar are volume and curtailment, price, and term — "the perpetual duration of the supply arrangements." Domtar had spent the preceding weeks negotiating amendments with Gillfor without success, and in Mr. Stagg's view, "informed by 35 years of experience working in the British Columbia forestry industry," Gillfor wants changes "inconsistent with industry and market standards and, in any event, untenable based on Domtar's own economic circumstances." Gillfor's own affiant, Gurwinder Gill, had deposed on August 12 that he considers the agreements uneconomical, in part because they may restrict Gillfor's fibre supply for the sawmills; Mr. Stagg says they require only that the sawmills' chips and by-products and the licence's pulplogs go to Domtar, per the Affidavit #2 of Chris Stagg, Sept. 8, 2026, paras. 4–6, 21–22. Domtar is prepared to fix a term, provided it runs at least to June 30, 2047 with no termination rights before then.

Then the mill. "On August 20, 2026, Domtar announced an indefinite closure of our Howe Sound Mill and Bayview fibre chipping facility in Port Mellon, British Columbia, which will come into effect at the end of September 2026." Domtar attributes it to reduced demand from Asia, poor global pulp pricing and high domestic fibre costs. The mill was built in 1909; Domtar says it invested approximately $1.3 billion to modernize it in 1991, approximately $400 million more in 2014 and approximately $100 million between 2022 and 2025. The province has appointed two negotiators, Don Wright and Don Kayne, to talk to Domtar about reopening, per the Affidavit #2 of Chris Stagg, Sept. 8, 2026, paras. 22–25, 28. Mr. Stagg is hopeful the curtailment will be brief. "However, if the arrangements guaranteed by the Supply Agreements are extinguished as a result of the proposed sale to Gillfor or otherwise, I do not believe there is any realistic way for the Howe Sound and Bayview facilities to reopen." No new pulp mill has been built in the province in approximately 50 years, he adds, and one would cost more than $3 billion, per the Affidavit #2 of Chris Stagg, Sept. 8, 2026, paras. 29–30.

TimberWest's contracts work differently. Under the log and cedar log supply agreements, Mr. Broekhuizen says, "no logs and no money are exchanged between TimberWest and Teal"; the logs are deemed to be supplied and counted toward TimberWest's own obligations to Domtar, while Teal harvests and mills them and sells only the chips and residual fibre to Domtar, at market price. If the agreements were terminated, TimberWest would have to source replacement logs on the open market at an expected cost of between $1,050,000 and $2,650,000 a year. He also says Gillfor did not attend a meeting scheduled with TimberWest for June 26, 2026, and never initiated discussions about new arrangements, per the Affidavit #2 of Nick Broekhuizen, Sept. 1, 2026, paras. 27–32.

Three other proposals

The first is from Riverside Forest Products Inc. On August 11, two days before the original hearing date, its counsel wrote to the monitor that Riverside had understood it was still negotiating to buy the same assets, had secured the $20 million equity contribution discussed with the monitor and Wells Fargo, and was "surprised to learn" an agreement had been signed with someone else. It offered a purchase price of $125 million, "subject to a portion of the purchase price being funded by the existing secured creditors," proposed to keep the Domtar and TimberWest agreements, anticipated increasing its equity to $30 million, and asked the monitor to adjourn its application until after September 25, per the Affidavit #1 of Jordan Beaulieu, Sept. 8, 2026, Ex. "A". The letter was put in evidence on September 8.

The second is Ditidaht's. On July 29, 2026, Ditidaht Economic Development Limited Partnership submitted what its executive director, Bryan Cofsky, describes as "an unconditional, qualified bid" for TFL 46 and associated assets and liabilities at $30,780,000 in cash, with the Domtar and TimberWest supply agreements among the assets, and paid a $1,539,000 deposit. It did not know, he says, that the monitor had already signed with Gillfor; it understood bids were due by July 31. The bid followed a $12 million letter of intent in 2024 for the part of the licence inside Ditidaht territory and a $20 million joint bid with the Pacheedaht and Snuneymuxw First Nations for all of it; neither was accepted. "DEDLP remains ready, willing and able to complete the transaction contemplated by the APA if the Surrey Transaction is not approved," per the Affidavit #1 of Bryan Cofsky, Sept. 4, 2026, paras. 8–15, 22.

The third is the Jones family's. An unfiled notice of application dated September 7, in the names of shareholders Richard Jones and Thomas Jones, asks for time until October 15 to put a restructuring plan to the court. The plan would sell TFL 46 to Ditidaht for $30,000,000 "on terms preserving the existing commercial arrangements between Domtar, TimberWest and Teal-Jones," with a $40,000,000 investment proposal from Leslie Properties Ltd. and a $70,000,000 financing proposal from FGI Worldwide LLC that, the notice concedes, expired on May 28, 2026. It puts the existing first mortgage debt to RBC and BDC at about $36,000,000 plus about $10,500,000 of accrued interest, per the Notice of Application of Richard Jones and Thomas Jones (unfiled), Sept. 7, 2026, Part 1, para. 1; Part 2, paras. 2–3.

The numbers

On September 10, with the hearing still under way, the monitor filed a two-page supplement. "The Monitor notes that counsel for various parties have noted the absence of any evidence on the record regarding the profitability of the TFL 46 forestry operation." Attached are the Teal Jones Group's internally prepared segment statements for 2019 through 2023, and the TFL 46 column reports an EBITDA loss in every year: $2,172,000 in 2019, $7,088,000 in 2020, $4,879,000 in 2021, $10,036,000 in 2022 and $6,609,000 in 2023. "While the above noted losses may not be directly attributable to the various supply agreements with Domtar and Timberwest, the Monitor notes that the TFL 46 forestry operation as managed by the Teal Jones group was unprofitable," per the Third Supplement to the Twenty-Ninth Report of the Monitor, Sept. 10, 2026, paras. 3–7.

The five EBITDA losses total $30,784,000. The appendix itself, a five-page spreadsheet stamped "Draft - Work in Progress," shows more. The licence's cost of sales exceeded its sales in each year, so gross margin was negative throughout, ranging from a $12,000 loss on $29,210,000 of sales in 2019 to a $7,085,000 loss on $85,777,000 of sales in 2022. After interest, depreciation and extraordinary items, the segment's net losses were $4,673,000, $10,565,000, $15,432,000, $20,263,000 and $8,981,000, a total of $59,914,000. The figures, the sheets say, are based on management's data and "not adjusted for consolidation or any due diligence adjustments," per the Third Supplement to the Twenty-Ninth Report of the Monitor, Sept. 10, 2026, App. "A". The group as a whole reported positive EBITDA in each of those years.

The supplement does not say whose counsel raised the point.

The monitor had also applied for September 8 and 9 to extend the stay, due to expire September 10, to October 15, along with the maturity of the Wells Fargo and Export Development Canada interim facility, per the Notice of Application (Stay Extension), Sept. 2, 2026, Part 1, para. 1. No order on either application is in the record read for this piece.