March 19, 2010

New Brunswick to cover debts of troubled Atcon Group

MIRAMICHI, N.B.

The Province of New Brunswick will have to pay $50 million to cover loan guarantees made last summer to the Atcon Group of companies, a government lawyer has confirmed.

John Logan said in Court of Queen’s Bench this week that under the terms of the loan guarantees to the Atcon Group the government will pay Scotiabank by the end of the week and then look to seek repayment from the company as a creditor.

Atcon owes creditors about $250 million with about $99 million of that owed to Scotiabank.

The province has invested about $72.5 million in the companies over the last 10 years. The government has repeatedly defended the decision to provide the $50 million in loan guarantees last June.

The Conservative Opposition has repeatedly attacked the Liberal government and accused it of not doing due diligence.

“We raised red flags when the government announced this but it seems to fall in line with their overall fiscal mismanagement that has seen the province’s debt and deficit rise to unsustainable levels,” finance critic Bruce Fitch said.

Atcon was started in 1978 and quickly grew with companies specializing in construction and fabrication, employing as many as 2,000 workers in 2008.

However, it has had difficulty paying creditors over the last two years, blaming the global economic recession and difficulties getting paid for completed contracts.

Earlier this month, Ernst and Young became a court-appointed monitor after seven Atcon companies were placed under creditor protection. Another five were placed in receivership.

The firm is to report on ways to restructure the company or sell assets in an effort to avoid collapse. But Atcon owner Robbie Tozer accuses Ernst and Young of being in a conflict as the receiver and the monitor.

At the start of the hearing this week, Tozer’s lawyer, Rod Gillis, put forward a motion to replace Ernst and Young as the monitor, but Justice Thomas Riordon rejected it.

Riordon said “there is no evidence to substantiate the monitor is biased” and to change to someone else “would only result in further expense and delay.”

In a report filed with the court, Ernst and Young recommended that one of the Atcon companies — Atcon Industrial — be shut down immediately, the remaining employees terminated, and its assets sold.

One of the creditors, General Electric Equipment Financing, went further to recommend that Atcon Industrial be taken out of creditor protection, be placed in receivership, and Price Waterhouse Cooper be named as the receiver.

Riordon, though, rejected both suggestions for now. He gave Ernst and Young one week to work with Tozer to come up with a plan to keep the company afloat.

Outside the courthouse, Tozer said there is money to pay the employees and continue the work on a number of existing contracts.

Canadian Press

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