The Victoria company selling repellent devices that blast water and ultrasonic sounds at unwanted animals in gardens is working on a re-financing plan with a U.S. firm that will allow it to stay in business.
Contech Enterprises Inc. went to the Supreme Court of B.C. in late December with a proposal to settle its debts of $14.58 million to 217 creditors and stave off bankruptcy, according to trustee Deloitte Restructuring Inc. More than half the creditors are in the U.S. A majority of creditors for the 28-year-old Victoria firm voted Jan. 8 to support the proposal.
U.S. firm Vegherb LLC, which is owed about $1.5 million, was the only secured creditor opposing the plan. Vegherb, which manufactured and sold raised garden beds and sandboxes, sold its assets to Contech in February 2013 for cash and Contech shares, but money is still owed.
Supreme Court Justice Susan Griffin approved Contech’s proposal this week in Vancouver.
The goal is to have an agreement for fresh financing from Siena Lending Group LLC, of Stamford, Connecticut signed up by mid-February, Contech chief executive Mark Grambart said Thursday. Grambart said he is remaining as CEO.
Siena is to provide an initial $4 million in funds, which could rise by another $2 million if needed.
Contech’s plan set out a formula giving creditors shares in the company or a portion of what is owed. Those claiming less than $1,500 are to be paid in full.
“Essentially a lot of our creditors will become shareholders. Many of our creditors were shareholders before,” Grambart said.
Contech designs, manufactures and sells environmentally friendly products for the pet and gardening sectors, as well as a line of Christmas-related products.
Merchandise includes animal repellents, sprinklers, a calming compression shirt for dogs, Christmas tree stands and industrial products such as wood-boring insect lures for the forestry sector.
Of its 30 employees in Canada, 12 are in Victoria. Local staff work in finance, administration, marketing and sales, engineering and customer service, Grambart said.
Staff numbers rise due to seasonal demand for products such as tree stands, which are made in New Brunswick. Contech has another 35 staff in the U.S. employed by a subsidiary.
The past year has been difficult, Grambart said.
“This will enable us to emerge from the creditor protection a healthier company. And it is also very good for us to get this financing, which will allow us to run our business. We got into this situation caused by some debt that we brought on by acquiring companies and then having some bad seasons in terms of sales.”
On the positive side, Contech had new stands for large Christmas trees in every Home Depot store in the U.S. this past holiday season and that will be renewed this year, he said.
“We are hoping for an early spring, or at least not a late spring like last year because that really did hurt us in the lawn and garden business. Most of North America was under snow in April, which impacts us.”
Deloitte valued Contech’s assets at $2.369 million, with an approximate liquidation value of $1.5 million, according to court documents. Some secured creditors were not affected by the proposal, including HSBC and the Business Development Bank of Canada, because the trustee figured they could likely recover money owed if there was a liquidation.
Contech’s losses over the last three fiscal years total $4.5 million, a Supreme Court document approving the proposal said.
The company also faced “significant challenges to its traditional business model moving from a distribution model to also include direct-to-consumer sales, which added additional and unexpected costs to the acquisitions,” court documents said.
Contech is developing a bed-bug trap in conjunction with scientists from Simon Fraser University who identified a set of chemicals that can lure the pests into traps.
The company said a product could be available within the next year.
