Creditor moves to recoup debt from Monette Farms

REGINA — A court hearing later today will determine whether Monette Farms continues operating under court protection for the next several weeks.

However, the court is also expected to deal with an application from Bank of Nova Scotia to be excluded from a further stay so it can collapse substantial life insurance policies on chief executive officer Darrel Monette.

You can follow all our coverage of Monette Farms here.

The application said Scotia Wealth has spoken to both Monette and the lenders, led by Scotiabank, and will obtain the cash surrender value of the $130 million policies to pay down debt.

It has to be excluded from the stay in order to enforce this security.

Why it Matters: Monette Farms is currently under Companies’ Creditors Arrangement Act protection while it restructures due to cash flow problems.

Monette Farms has two key-man life insurance policies through Sun Life and Manufacturers Life insurance companies. It is both the holder and the beneficiary of them.

The application said the cash surrender value is about $6.8 million and a premium of $2.1 million is due May 4.

“No mechanism to pay said premium has been provided for in these CCAA proceedings,” the application said.

If the policies remain in effect until May 4, the cash surrender value rises to $7.2 million.

The bank said Scotia Wealth granted credit to the Monette companies worth $7.7 million a year ago, and the company assigned the surrender value of the policies as security, along with a $1.1 million personal guarantee from Monette.