CALGARY – Bondholder attempts to stop insolvent Sanjel Corp.’s blockbuster sale of its fracking business in Canada and the U.S. have been denied.
In a motion filed in Alberta’s Court of Queen’s Bench, the bondholders alleged that Sanjel, one of the largest fracking companies in Canada, “used the guise of good faith negotiations as a means of depriving bondholders of their opportunity to protect their interests.”
They said they were “shocked” to learn of the sale of Sanjel’s fracking business after multiple attempts to restructure the company’s debts.
The creditors had also signalled their intention to go after Sanjel’s landlord, which is owned by Sanjel’s shareholders, to recoup some of the US$300 million they say they are owed.
Fracking company Sanjel Corp sells itself to private-equity backed STEP Energy Services
But the creditors attempt to block the sale was denied in court on Thursday, according to people with knowledge of the case.
The bondholders had claimed that if the sale to STEP and Liberty were approved, “There will be nothing left to restructure.”
Out of concern that bondholders would not be repaid, U.S. investment firms Ascribe Capital LLC’s and Clearlake Capital Group LP’s had attempted to the stop the sale of Calgary-based Sanjel’s fracking business to Calgary-based STEP Energy Services Ltd. and Liberty Oilfield Service.
Ascribe Capital’s chief investment officer and managing director Lawrence First said in an affidavit that, after the fracker missed a US$11-million interest payment on Dec. 11, his firm and Clearlake made multiple offers to restructure Sanjel’s debt by sending over new term sheets.
Instead of accepting the offers or negotiating the terms, First said Sanjel and its banking syndicate postponed meetings with bondholders and appointed a debt monitor without the bondholders’ knowledge over the course of the winter. Meetings were postponed until the sale was announced in April.
The bondholders’ motion also demanded that Sanjel’s former CEO Darin MacDonald, son of founder Don MacDonald, swear an affidavit describing payments paid by Sanjel, which is owned by the MacDonald family, to a company called MacBain Properties Ltd.
Alberta government records show Calgary-based MacBain Properties is also owned by the MacDonald family, and court proceedings show that Sanjel’s rent and other payments make up 90 per cent of MacBain’s income.
“Generally speaking, the MacBain Assets were custom-built or purchased at the request and upon the direction of Sanjel,” MacBain president Darin MacDonald said in an affidavit filed before the bondholders’ motion.
“Sanjel would advise MacBain what it wanted, and MacBain would source the location, purchase the property and custom-build the facility,” he said.
Sanjel sold its real-estate assets to MacBain in 2002, MacDonald said, and MacBain “was always kept as a separate corporate entity – it is not a subsidiary of Sanjel, there are no guarantees or inter-corporate debt (except some trade debt and short-paid rent owing from Sanjel to MacBain in the last few months).”
A spokeswoman for MacBain declined comment.