We’re just fine, Canadian North says, following demise of sister firm NTCL
Norterra-owned airline, other companies, listed as guarantors of NTCL’s enormous debt
(Corrected Dec. 19, 10:00 a.m.)
The day after its ailing sister company, Northern Transportation Co. Ltd., was effectively euthanized, the president of Canadian North Inc. said Dec. 16 that the Norterra-owned airline will continue to operate normally.
“While the proceedings remain before the courts, I can state that no new information has come forward that pertains to Canadian North and it remains business as usual for our employees, customers and vendors,” Steve Hankirk, Canadian North’s CEO, said Dec. 16 in a statement in which he acknowledged Canadian North has been acting as a guarantor of NTCL’s debt.
That statement came hard on the heels of a deal approved Dec. 15 by the Alberta Court of Queen’s Bench under which the Government of the Northwest Territories will buy nearly all of NTCL’s remaining assets for $7.5 million.
Following the GNWT asset purchase, it’s expected that NTCL, which has no money, will be either dissolved or declared bankrupt.
The GNWT purchase includes 57 barges, eight tug boats, and three ocean-going vessels as well as shipyards, marshalling areas, warehouses and other pieces of land and infrastructure in Hay River, Norman Wells, Inuvik and Tuktoyaktuk.
In a news release Dec. 16, the GNWT said they made the acquisition to ensure that off-road communities along the Mackenzie River and Arctic coast can continue to receive vital supplies of fuel and dry cargo.
They do not plan to operate a government-owned shipping company, the GNWT said.
Instead, they will own the assets and look for private sector businesses to operate a re-supply service for them.
And the GNWT said the amount they paid, $7.5 million, is much less than the previously appraised value of the assets: $55.7 million for marine equipment and $10.3 million for land properties.
However that $7.5 million, along with $5.7 million that was raised in previous asset sales, doesn’t come close to covering NTCL’s outstanding debt, which stood at $120.6 million in the spring of 2016, and following this year’s shipping season, rose to about $130 million.
That raises questions about the continued impact of NTCL’s insolvency on its sister companies, all wholly-owned subsidiaries of Norterra Inc., which since 2014 has been owned 100 per cent by the Inuvialuit Development Corp.
In public documents filed in Alberta court, Norterra’s subsidiaries are listed as guarantors of NTCL’s debt, which is owed to a consortium of three banks that signed a credit restructuring agreement with NTCL in the fall of 2015.
That October 2015 credit agreement includes the following Norterra-owned companies as guarantors of NTCL’s debt: Beaufort Delta Petroleum, Weldco-Beales Manufacturing, Braden Bury Expediting, and Northern Industrial Sales.
Norterra recently sold the assets of Northern Industrial Sales to an Edmonton-based company called Tenaquip, but the purchase price was not disclosed.
And on Sept. 15, 2016, Norterra sold Braden-Burry Expediting, at an undisclosed purchase price. This means Northern Industrial Sales and Braden-Burry are no longer guarantors of the debt.
In his statement, Hankirk acknowledged Norterra has used Canadian North to back up NTCL’s debt.
“Canadian North, one of NorTerra’s most profitable subsidiaries, has supported the debt of NTCL for several years,” Hankirk said.
But he also said he expects Canadian North to weather the storm and end up in a better position.
“The resolution of NTCL’s financial obligations will allow Canadian North to come through this as an even stronger airline and position us for a return to growth,” Hankirk said.
The details of Canadian North’s exposure to NTCL’s insolvency, and that of the other Norterra subsidiaries, are not available to the public.
That’s because the Alberta court has sealed from public view all information related to those loan guarantees on the grounds that the information is so commercially sensitive, publicizing it could do serious damage to Norterra.
Because of that ruling, the public versions of NTCL’s 2015 credit restructuring agreement are heavily redacted—and the section listing Canadian North’s obligations are blacked out completely.
However, Hankirk said he hopes all remaining matters related to NTCL’s demise can be resolved quickly.
“We look forward to a speedy resolution of this matter and take great comfort in the continued and full support of our shareholder, the Inuvialuit Development Corporation,” Hankirk said.
Canadian North was caught off-guard this past November, when First Air abruptly announced that it would pull out of codeshare agreements under which the two carriers have shared routes and planes since the spring of 2015.
But this past weekend, the airline scored some badly-needed public relations points when it sent an extra Boeing 737-300 jet to Ottawa and Iqaluit from Edmonton to carry stranded holiday travellers on Dec. 18.
That’s because, on Dec. 16 and Dec. 17, First Air had to cancel flights due to poor weather and for mechanical reasons.
An earlier version of this story stated that Braden Burry Expediting was a guarantor of NTCL’s debt, and is listed as such in a credit agreement signed in the fall of 2015. However, Norterra sold Braden Burry on Sept. 16, 2016, and the company is no longer a guarantor of NTCL’s debt.