Nunasi pays off debt to the Nunavut Trust

DWANE WILKIN
Nunatsiaq News

IQALUIT – the Nunasi Corporation has ushered in the new year on a positive note by striking a landmark debt-refinancing deal with a major chartered bank.

The agreement between Nunasi Corp. and the Royal Bank, signed Dec. 23 after several months of negotiation, lifts many of the borrowing restrictions under which the Inuit-development corporation has been operating for the last five years.

The agreement transfers $2.7 million in remaining debt from Nunavut Trust to the Royal Bank and extends additional lines of credit to both Nunasi and its subsidiary, Nunasi Projects, CEO Fred Hunt said.

“The confidence that the Royal Bank has shown in our ability to handle that credit facility is very encouraging,” Hunt said. “That allows us to really grow.”

The Nunavut Trust, which manages cash assets paid to Inuit beneficiaries under the terms of the Nunavut Land Claims Agreement, helped Nunasi restructure its debt in the early 1990s.

The problems date to the late 1980s, when the company was operating at a loss and unable to meet its loan repayment obligations with the CIBC.

In a restructuring plan negotiated with the bank and the Tunngavik Federation of Nunavut – Nunavut Tunngavik Inc.’s predecessor – the line of credit with the CIBC was frozen and Nunasi Corp. was forced to sell off many of its assets, operating from that day forward on its own cash flow.

By 1988, however, the outstanding debt had ballooned to more than $10 million, thanks to hefty interest rates.

Just prior to settlement of the Nunavut land claim in 1993, the CIBC agreed to reduce the debt to $6.5 million, half of which Nunasi Corp. paid directly to the bank itself.

The other $3.25 million was supplied by Nunavut Trust in the form of a loan at “higher than conventional lending rates” Hunt recalls.

Though happy to accept the loan from the Trust under the circumstances, Hunt said the company began to feel constrained by conditions attached to the loan agreement, in particular, one which capped its debt-to-equity ratio.

“This meant that Nunasi always had to maintain more in equity than it did in debt on its balance sheet,” Hunt said. “That was very restrictive because it prevented us from borrowing money or entering into mortgages on real estate deals.”

The Trust had grown uncomfortable with the arrangement, too, Hunt noted, since the slightest deviation from the conditions of the loan required Nunasi to appear before trustees to request a waiver.

Last March they gave their blessing to the search for an alternate solution, and Hunt resumed talks with the banks.

The refinancing agreement finally settled on last month with the Royal Bank re-establishes Nunasi’s credibility with private creditors and paves the way for expanded growth in the new year, Hunt noted.

Later this month, Nunasi Corporation directors plan to tour Nunavut communities in person to describe in more detail the company’s operations to Inuit beneficiaries, who are Nunasi’s shareholders. At that time, Hunt said, the corporation will outline its corporate strategy for the coming months.

Nunasi earned revenues last year worth more than $80 million off its investments in 26 northern enterprises.