Hay River’s business community was rattled last week when a cornerstone of the town’s economy announced it was going into court-supervised restructuring.
Northern Transportation Company Limited (NTCL) – which runs barges up the Mackenzie River and operates a shipyard in the community – announced on April 27 that it had initiated a process under the Companies’ Creditors Arrangement Act to facilitate restructuring and refinancing of its operations.
“The statement of operations for NTCL shows an aggregate net loss from operations for the 2015 fiscal year. NTCL’s 2015 loss from operations alone was $5,401,000. Although certain efficiencies have been realized in the past six months, it is anticipated that NTCL will continue to lose significant amounts of money absent the proposed restructuring being developed in these proceedings,” state court documents filed in the name of Kyle Barsi, NTCL’s vice-president of finance.
On April 27, the Court of Queen’s Bench of Alberta granted NTCL protection under the act for an initial 30 days to expire on May 27, and that could be extended.
NTCL will continue to operate but will be supervised by a court-appointed monitor PricewaterhouseCoopers Inc. which will oversee operations, liaise with creditors and help develop a restructuring plan.
“This is a very difficult decision for us to reach because NTCL has a long and storied history in the North and we looked for really any way we could to continue without doing such a drastic legal restructuring,” said Nathan Graham, chief corporate officer with the Inuvialuit Development Corporation (IDC) which owns NTCL’s parent company, NorTerra Inc. “And quite frankly when we looked at available options, there really weren’t any other options that would allow this company to continue without doing this legal process.”
The development corporation is an investment company wholly owned by the Inuvialuit Regional Corporation. Court documents say NTCL owes the development corporation $32 million in loans. NTCL also has $72 million in debt to banks.
Graham said NTCL will look at all available alternatives for restructuring to make it sustainable in the long term.
“We do that recognizing that we have employees that will stay at the top of our mind looking out for their interests, as well as the critical services that NTCL supplies in the North,” he said.
Graham said a strategy is being worked on to make sure restructuring doesn’t interrupt the critical supply for 2016.
“The 10 communities that depend on us will get their resupply for this year and there will not be a significant impact to our employees for this year,” he said.
In August 2015, NTCL employed 12 people at its terminal in Hay River and 34 at the shipyard. The projected job numbers for August this year are 10 at the terminal and 33 at the shipyard.
As for barging, there were 36 departures from Hay River in 2015, and there will be a projected 27 this year.
Graham said NTCL and its owners understand that news of restructuring is concerning to Hay River and the company’s employees.
However, he explained it is part of the plan to address long-overdue financial issues that have been troubling the company and operational issues.
“The business has not been profitable for many years. Upwards of a decade it has been losing money,” he said. “The thing to remember is there have been significant changes over three to five years that have really impacted the long-term viability of the company.”
That includes a decline in oil and gas activity in the North and low water levels on the Mackenzie River.
“So there really is a plethora of factors that have come together at this particular time that don’t allow us to continue with the status quo,” said Graham. “I’ll say that the IDC – the Inuvialuit Development Corporation – has for the last several years subsidized losses at NTCL with a recognition of looking for another solution other than this. We’ve simply come to the point where that’s just no longer sustainable.”
When asked if the current process might lead to NTCL closing in Hay River, he responded, “The honest answer there is that we don’t really know what the outcome will be.”
Noting that NTCL is a complex business and challenges facing it are also complex, Graham said there is no timeline for restructuring but that it could take several months.
Mayor Brad Mapes said NTCL plays a “huge part” in the economy of Hay River.
“As a town, we’re going to help NTCL move forward and figure out a plan that we can make this barging come back to where it should be,” he said.
Asked with the town could do to help, Mapes said it could lobby governments.
“The various governments need to step up to the plate and help them find a solution,” he said, while mentioning dredging, for example.
Mapes said hopefully NTCL will survive but even if it doesn’t, the Mackenzie River and Great Slave Lake will remain, and waterways are key to transportation in the North.
The mayor said that, without barging, supplies would have to be flown into some communities.
“The government has to realize that without barging in our community for the North, they’re going to have added costs in getting product into these communities,” he said. “We need to figure out a solution that would work to keep this going.”
Transportation Minister Wally Schumann said the GNWT is concerned any time a Northern business is struggling.
“Hopefully, in the next year or so, they continue to operate and come up with a plan that helps them move forward and become a viable business,” said Schumann of NTCL. “That being said, if they decide to put their business up for sale or something, I’m sure there are going to be other people to fill the marketplace because there’s always going to be a need for services on the Mackenzie River and the Beaufort Delta.”
As the MLA for Hay River South, he said NTCL is important to the community.
“We’re going to keep an eye on this situation very closely because there’s a number of jobs there, they spend a lot of money locally, they pay taxes there,” said Schumann. “It’s a big part of our community. So this is serious.”