The New Brunswick government has acknowledged that the Atcon Group, in receivership and fighting for its survival, got too big, too fast.
Until now, the Liberal government had blamed the global economic crash of 2008 for much of the Miramichi-based company's difficulties. But documents filed in Miramichi's Court of Queen's Bench as part of the company's bankruptcy case suggest there were problems with how the company was run even before the recession hit.
When asked about the financial problems that predated the economic collapse, a Business New Brunswick spokesman said Atcon tried to become too big, too fast and was already in a "precarious" position by the time the recession hit in 2008.
Rocco Fabiano, the assistant general manager of Scotiabank's special accounts management division, said in an affidavit filed in court the financial troubles started for Atcon in October 2007. That's when Atcon started defaulting on its payments to the bank.
In July 2009, Scotiabank hired Ernst & Young to review Atcon's finances.
According to the court documents, that is when it was clear Atcon and its companies "had a serious working capital shortage and required a significant equity injection."
And last fall, after the provincial government backed more bank loans to Atcon, it discovered problems at Atcon's head office.
The affidavit said the bank found reporting errors in Atcon's books, and the group's borrowing base was reduced by 10 per cent to account for those errors.
Additionally, the bank found potentially "non-compliant" items worth $18.6 million, a finding that Atcon president and CEO Robbie Tozer disputed.
N.B. could lose close $70M
Purdy Crawford, who chaired the provincially-appointed Atcon advisory board, said last week that he hopes these financial problems offer Tozer a chance to become "a more sophisticated and disciplined businessman."
New Brunswick taxpayers stand to lose $70 million in loans and loan guarantees if Atcon Group can't pay its creditors.
Most of that is from three loan guarantees worth a combined $50 million that Business New Brunswick handed out only nine months ago.
Atcon now has 329 employees, including 232 who are in Alberta working on a Shell oilsands project. According to the court documents, the company may not have enough money to pay for their flights home.
The documents also show that Atcon owes a total of $250 million in debt, including $99 million to Scotiabank.
The New Brunswick government could have $63 million in loan guarantees that could be cashed in, plus another $9 million in other loans.
Atcon and its creditors will be back in a Miramichi court on March 15.
By that time, if Atcon hasn't sold enough assets to save itself, the court could order the liquidation of some of the companies that make up the group.