Naramata winery wins battle against CIBC to stay out of interim receivership and continue caring for their vineyards – Penticton News

Foxtrot Vineyards has earned themselves a short-term victory against a petition from CIBC in the B.C. Supreme Court, in order to continue caring for their vines.

According to the Supreme Court decision published on Friday, CIBC provided various “credit facilities” – a type of loan – to the director of Foxtrot Farms ULC and Foxtrot Winery ULC, all of which were payable on demand, regardless of whether a default had occurred. The court says the winery has defaulted on these loans, owing nearly $2.7 million.

As security, CIBC was granted a mortgage over the lands owned by Foxtrot and general security over the property and undertaking of Foxtrot, along with assignment of the winery licence, trademark assignment of Foxtrot, and guarantees provided in relation to the loan agreements.

Justice David M. Masuhara denied CIBC’s petition in mid-May to appoint an interim receiver after serving the Naramata-area winery a notice of intention to enforce security.

“The purpose of the interim receivership is said to be to preserve and protect the secured creditor’s security and obtain information from the debtors while stabilizing the business,” Masuhara wrote in his decision.

“Once all notice periods have elapsed, the lender will then seek the appointment of a full receiver.”

According to the decision, Foxtrot has committed multiple ongoing defaults under the credit facilities and the amount outstanding as of April 24, 2024, was $2,692,991.38, with no payments made towards the outstanding indebtedness.

CIBC said it provided its consent for the sale of certain wine inventories on the condition that the monies received were to pay down the business’ debt.

“Foxtrot since has sought to have the monies used to pay for various unpaid wages, including Mr. Todd, the director of Foxtrot; to pay source deductions; and for vineyard management services. Information on various aspects was requested by CIBC in regards to the business, including vineyard management and services.”

Not all of these requests were approved by CIBC and the director of Foxtrot requested on May 1 to be given funds for vineyard management, including pruning and spraying on a daily or weekly basis during the growing season.

The estimated costs for vine management for the remainder of the year was in the range of $70,000 to $95,000.

The decision said the director later asked again about release of funds for pruning, saying that without it, “the vineyard would fester and degrade.”

CIBC said in their submissions that FoxTrot has not presented them “any viable plan to maintain the assets, obtain refinancing, or otherwise alleviate its financial situation which is deteriorating.”

The winery said that enforcing a remedy against the property of the farmers who will be deprived of control over the farm and assets with the appointment of an interim receiver would be against the Farm Debt Mediation Act.

“Foxtrot argues that CIBC has not met the burden of establishing necessity. It further argues that when the pending transactions for the sale of the business and land are completed, CIBC will have full recovery of its secured interest, as well as allow for the payment of unsecured creditors,” the decision reads.

“It also argues that the appointment of an expensive interim receiver would cause significant costs to be incurred and put at risk the pending sales transactions that have now come to light.”

Foxtrot maintains they have things in control with their vineyard management being managed by a company that has expertise in the area, including pruning; that the winemaking process is under management; their director continues to oversee and manage the business; and that offers for the purchase of the business, brands, and inventory has led to a letter of intent being signed with a major public company.

The land has been listed for $2.65 million and Foxtrot said a confidential offer has been received, stated to be “reasonably close to the asking price,” conditional on financing and sale of the buyer’s own property.

Masuhara wrote that the petition against the winery is denied.

“In these circumstances, and having regard for the purposes of the FDMA, I do not find it necessary for the appointment of the interim receiver, which is an extraordinary remedy,” he added, noting that Foxtrot will have to provide details as to the arrangements they have with Premium Vineyard Management.

This includes the materials that document the relationship, that the service is to be provided by them, the schedule for the provision of such services, and the compensation for such services.

Director Todd will need to give logs of his scheduling with managing the overall business and to provide, on a weekly basis, a detailed log of his activities in this regard.

Foxtrot will also have provide to details of the arrangements made with the winemakers and part-time cellar labourer.

As of Friday evening, the Foxtrot Winery property, which is listed at 1201 Gawne Road, is still for sale for $2,650,000 and their website to book tastings at the winery states that “we are currently unable to accept reservations for the 2024 season.”