August 27, 2008

Montreal shipbuilder Davie Yards works on restructuring plan

MONTREAL

Davie Yards is working on a restructuring plan to try to protect the Quebec-based ship builder from an expected cash shortfall more than a year after its purchase by Norwegians.

“We have to restructure our finances so we have a better platform for the future,” new CEO Steinar Kulen said in an interview.

Davie warned recently that the company doesn’t have enough cash to meet its requirements after six months. It took a loss provision of $36.1 million for vessels under construction.

The owners, who purchased the company with equity in October 2006, have invested $22 million to ramp up production. But a series of productivity and cost pressures have failed to allow it to raise enough cash from operations.

“The company has not got a proper financing from the very beginning,” despite a $47.3-million initial public offering in February said Kulen.

Kulen, who took over in March, said he expects the refinancing to be completed in three to five months.

Nervous workers remain hopeful that the Norwegian owners will resolve the cash shortfall that once again threatens the ship builder.

“People are very worried but the morale is good,” said Paul-Andre Brulotte, union president of the Syndicat des travailleurs du chantier naval de Lauzon.

Brulotte said there has been no talk of layoffs or wage cuts as the owners seek new investors and contracts.

Work is continuing at the site near Quebec and the company continues to hire people. There are more than 1,000 people employed at Davie, up substantially from a year ago. Kulen hopes to employ 1,500 people once production is ramped up next fall.

While there are no discussions about closing the site, the ability to secure refinancing will determine its future.

“If we are not able to, it will definitely lead to a situation like that in the long term into the future, but not today,” he said.

Canadian Press

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