Boundary Sawmills Inc. (BSI) will not default on a $1-million mortgage payment due today to Fox Forest Products, the former owners of the Midway mill.
Both BSI President Doug McMynn and Stephen Hill, a financial planner, confirmed that money had been secured and the mortgage payment will be made.
“What we’ve done is work with the Heritage Credit Union, who has worked with us before in the initial offering helping people do their RSPs, and we’ve managed to work with them to come up with a low-interest, low-principal loan to complete the deal with Tom Fox (president of Fox Forest Products) by Aug. 31,” explained McMynn.
“Because of holidays, we are going to begin to work with them to clean up a second loan, which is through the Southern Interior Development Initiative Trust (SIDIT), which is about $800,000, and we’re going to combine the two in about six weeks to one loan that is workable for us to make the payment on and continue to raise funds.”
McMynn said that the SIDIT short-term loan was for 14 per cent and BSI had hoped that it could raise enough funds through shareholders – people buying into the Venture Capital Corporation – to pay it all off but that didn’t happen.
He said BSI worked with the Heritage Credit Union to work out a loan payment structure that was beneficial to shareholders, to the company and to Vaagen Bros. Lumber – who is leasing and operating the mill site – so it wouldn’t default on the mortgage.
“What people really need to understand is that we have a loan. We have interest rates attached to that loan and we still have to sell shares,” explained Hill.
“This loan is great and it allows us to pay off Fox but we still have that $750,000 liability to SIDIT and that frees up the $200,000 we raised to go to SIDIT and that knocks SIDIT down to about $500,000 and we need clear up SIDIT by the end of December.”
Hill said that there were also some investors from across the province who stepped up over this past weekend to assist with the loan with the credit union, although he said they didn’t want to be identified.
McMynn said that the proverbial road in getting the mill back and running has been bumpy but doesn’t foresee any other problems arising.
“Once we finish with the Heritage Credit Union, we’re pretty much rock solid. We just go along with what the lease agreement is with the Vaagens and they have the option to purchase the property at the end of the fifth or beginning of the sixth year and they may exercise that or they may not exercise that,” he said.
“Either way, right now the way it works is because we’ve paid off Tom Fox, we haven’t defaulted with our lease or with the mortgage and therefore we have 100 per cent of the lease payments coming from Vaagen and 100 per cent of the royalties coming to us too.”
McMynn and Hill said that they were still seeking people to invest in the mill, however.
“With the prime interest rate at three per cent, that makes it very attractive but we have to be concerned with if the prime interest rate goes up, all of our rent that we receive from Vaagen will go out to support interest and it won’t actually go to shareholders,” Hill said.
“We need to get more shareholders, other than the 42 people in the local area that have stepped up to the plate, and we need to broaden that out to 400 shareholders and raise that full $5 million that we’re trying to accomplish.”
Still, Hill expressed relief that the payment would be made. “Put it this way, all the adrenaline is running out of my body and I think I’m starting to crash,” he joked.
McMynn also expressed relief and said that Boundary Sawmills Inc. has created 50 jobs without help from the government.
“I think that’s remarkable for any community in the West Boundary (and one the size of Midway) to bring back a mill to create the jobs,” he said.
Work is already being done by Vaagen Brothers Lumber to upgrade the mill.