Château Montebello forced into receivership, triggering new ownership mystery

The stone fireplace is seen inside the Fairmont Le Château Montebello in Montebello, QC. on Thursday.Keito Newman/The Globe and Mail

The iconic Château Montebello has been forced into receivership after its foreign owners racked up $63.9-million in debt and the 95-year-old Quebec resort became insolvent.

The Château Montebello hotel is the largest log cabin ever built and holds a special place in the country’s national psyche and history. The rustic and scenic venue by the Ottawa River has hosted G7 and NATO leader summits, as well as prime ministers, presidents, movie stars and even royalty. Photos of the events and its guests line the walls of the hotel.

The Caisse Desjardins de Brossard filed a motion on Oct. 9 to push the hotel into involuntary receivership under the Bankruptcy and Insolvency Act.

A Quebec Superior Court official in the District of Gatineau approved the motion and issued an order on Nov. 3 immediately naming PricewaterhouseCoopers Inc. as the official receiver.

PwC then took control of the 211-room hotel, golf course and spa the same day and immediately adopted “protective measures,” according to documents filed in Quebec Superior Court.

The four-season resort remains open for business. It is operated under a long-standing management agreement with Fairmont Hotels and Resorts, now a unit of Accor Hotels.

The back of the Fairmont Le Château Montebello is seen in Montebello, QC. on Thursday.Keito Newman/The Globe and Mail

PwC trustee Philippe Jordan told The Globe and Mail that the receiver aims to eventually sell the hotel property so proceeds can be distributed and shared among creditors.

In a Nov. 14 report to the court, PwC said that when it took control of the hotel properties on Nov. 3, it identified $47.6-million in assets, including $5-million in cash. The hotel itself was valued at $34.1-million.

The resort has piled up $63.9-million in debt, including $10.8-million in secured debt owed to the Caisse Desjardins de Brossard, the trustee’s first report to the court says.

PwC said the remaining $53.1-million was unsecured creditors’ debt.

The latter sum includes what the trustee’s report described as “$47,999,900 in loans payable to ultimate parent company,” which was not identified in the report.

The Château Montebello’s current owners are identified as Millennium Golden Jiachen Hotel Holdings Ltd. and 4345118 Canada Inc., according to Quebec court and property records, which state that Millennium Golden is majority-controlled by Evergrande International Hotels Group Ltd.

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But ownership of the hotel has been murky in recent years, and the PwC trustee said his firm is not certain who the hotel’s owner or owners are at this stage.

“We don’t know exactly,” Mr. Jordan said, adding that officials are sifting through corporate and office records and trying to reach Millennium Golden to clarify the ownership situation.

“The financial statements that were given to us by a third party do not identify the company involved,” he said, referring to the “ultimate parent company” that made $47,999,900 in unsecured loans to the hotel.

The Caisse Desjardins de Brossard said in a sworn statement that it lent $18-million to Millennium Golden in four tranches starting in 2018, of which 4345118 Canada had guaranteed $13.5-million in a mortgage to the Caisse. The balance outstanding on the Caisse loan is now $10.8-million, the lender said.

The credit union’s secured debt includes $10.2-million on the mortgage and unpaid interest arrears totalling $516,992. It’s unclear why the hotel did not pay its mortgage even though it had $5-million in cash.

The front entrance of the Fairmont Le Château Montebello is seen in Montebello, QC. on Thursday.Keito Newman/The Globe and Mail

The Château Montebello was built in 1930 by Finnish immigrant Victor Nymark, a master log home builder who came to Canada in 1924. He oversaw its construction in just four months.

Western Canadian loggers cut down 10,000 red cedar trees, loaded them onto rail cars and shipped them over the Rockies to Montebello, Que., to build the hotel.

The 21-hectare property offers cross-country skiing and hiking trails, indoor and outdoor pools, an 18-hole golf course, skating and curling rinks and a conference centre.

After operating as a private club for the rich and famous for decades, the hotel complex opened to the public in 1970.

Everyone can now see its famous centrepiece: a spectacular six-sided, three-storey stone fireplace. Its hearth and chimney tower 20 metres above the large log cabin lobby.

In 2014, developer China Evergrande bought the resort for $14.5-million, according to a Hong Kong Stock Exchange filing from the company. The deal was a showy sign of corporate China’s new financial power and influence on the world stage.

Chinese billionaire Bin Zhang became the owner of Millennium Golden in 2016 after an unannounced deal and was listed in Quebec court records as president from September, 2016, until September, 2019. Then, he was gone.

Again, there was no public announcement of his departure, though it was reported in Quebec corporate records reviewed by The Globe.

Evergrande has since collapsed under US$340-billion in debt, and its stock was delisted from the HKSE last summer. Several executives have been arrested and detained amid criminal probes.