What’s going on with the BZAM/Final Bell trial?

| Sarah Clark

Initially set for April 22, a motion by Final Bell against BZAM has been again postponed, this time until September 18 and 19, 2024.

In addition, BZAM requested and received a stay extension to and including July 15, 2024. The stay is to provide time for a stalking horse bid by BZAM’s owner to purchase the company, a move Final Bell has not opposed as they believe the move will free up the resources they seek concerning their case against BZAM.

The trial surrounds BZAM’s announcement in late 2023 that it would be acquiring Final Bell, which was quickly followed by BZAM filing for and receiving CCAA protection a few months later in February 2024. Final Bell argues the CCAA filing contradicts assurances BZAM had given the company before signing the agreement. 

That deal saw BZAM acquiring Final Bell Canada by issuing $13.5 million in equity in BZAM and granting Final Bell $8 million in promissory notes. At the time, the deal was said to make BZAM the fifth-largest Canadian LP.

Final Bell reacted to BZAM’s announcement at the time by saying it believes that the company’s initiation of CCAA Proceedings constituted an “improper use of creditor protection legislation to evade its creditors, defraud shareholders, and facilitate a related party going private transaction at an unjustified discounted value in order to circumvent a customary going private transaction requiring shareholder and creditor approval.”

In April, the judge overseeing the proceedings between BZAM and Final Bell postponed the date for a trial between the two companies following last-minute information presented to the court. That date was then set later on for July 15.

In addition, Final Bell filed a motion dated March 18, 2024, that is currently scheduled for September 18 and 19, 2024. The motion seeks a declaration that the equitable damages for which BZAM and its affiliates are liable to Final Bell are subject to a trust.

As part of that motion, although Final Bell had initially sought to have the deal with BZAM rescinded, they have since argued such a process is no longer viable given what it describes as the diminished value of Final Bell Canada since BZAM acquired it. 

The company is now seeking equitable damages for the deal once a stalking horse agreement is completed with the current Chairman of BZAM that would provide the cash Final Bell says is needed to pay them out. 

The Stalking Horse purchaser, if approved, will become the parent of BZAM and will own all of the Applicants’ business and operating assets, including Final Bell Canada.

As part of their reports to the court, BZAM shows the actual negative net cash flow from operations on a consolidated basis for the ten weeks ended May 4, 2024, of just under $4.7 million. This is compared to a forecasted negative net cash flow of around $4.4 million, as noted in the cash flow.

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