Directors resign, Westar fate left to court

The three remaining directors of Westar Mining (TSE) have resigned, leaving the fate of the company in the hands of the Supreme Court of British Columbia.

The six outside directors of Westar resigned in July to protect themselves from personal liabilities relating to severance obligations and other potential employee claims in the event of company bankruptcy. The remaining three directors failed to receive court approval to assign certain assets as collateral against employee severance claims. Westar had hoped to assign the obligation, amounting to about $26 million, to the assets associated with the Greenhills coal mine in southeastern British Columbia.

This would have effectively put the employees ahead of the Bank of Montreal, Westar’s biggest creditor with the lion’s share of the company’s $325 million in long-term debt.

Prior to resigning, the directors filed a notice of motion with the Supreme Court indicating that the company is unable to proceed under the Companies’ Creditors Arrangement Act.

Larry Bell, chairman, stated that stakeholders met for two full days and were very close, but in the final analysis the outcome was unsatisfactory. He said it is now up to the courts to determine how Westar Mining is to be administered.

If the court lifts its stay order with regard to protection against creditors, any creditor will have the right to immediately petition the company into bankruptcy.

Westar Group (TSE), which holds 67% of Westar Mining’s common shares, announced it has gifted the stock for no consideration to an irrevocable trust.

The parent stated that the action was taken to sever its shareholding interest in Westar Mining.