Business New Brunswick Minister Greg Byrne says two northern textile mills were thoroughly vetted before the provincial government began investing almost $80 million over the last decade.

The provincial government is now on the hook for close to $80 million after Atlantic Yarns in Atholville and Atlantic Fine Yarns in Pokemouche closed and filed for bankruptcy last week.

'There is no question that it is a significant loss and whether the province can recover any of those monies depends on the liquidation.'— Business New Brunswick Minister Greg Byrne

The two mills, both owned by Sunflag Canada, had struggled to stay afloat for years.

Byrne said all the necessary background work was done on the company, including examining its financial position and the potential future for the textile market.

The province is not a secured creditor, meaning it will likely lose its $80 million investment along with the 360 jobs the mills provided in the economically deprived region.

"There is no question that it is a significant loss, and whether the province can recover any of those monies depends on the liquidation and what payments are made to creditors and whether there is sufficient revenue generated to pay some of the losses to the province," he said.

When the investments were made, Byrne said, the textile industry's future looked strong. But he said the mills are among the growing number of corporate casualties hurt by the collapsing global financial markets.

Byrne said losing 360 jobs is difficult for any region, but he said it is even more devastating for rural areas.

'Classic example of corporate welfare'

Kevin Gaudet, the acting federal director for the Canadian Taxpayers Federation, said the mills were a bad investment of public funds.

"This is a classic example of corporate welfare. Governments use taxpayer dollars to support private sector companies who end up competing with other private sector companies and then they aren't able to compete effectively in many cases," Gaudet said.

"Then they take taxpayers dollars down with them when they go bankrupt."

The provincial government had doled out almost $80 million in grants and loans to Atlantic Yarns and Atlantic Fine Yarns in an attempt to preserve jobs.

Despite the yarn mills' bankruptcy, the business minister said the government still needs to fund projects in rural areas.

Byrne said financial institutions are more likely to help companies in urban areas, sometimes making the calculation that if a business fails they can earn a hefty amount by selling the building.

"But if you take that same building and put it in a rural community and you have a financial institution that is risk averse they are probably not as likely to want to finance that operation," Byrne said.

"So if government does not play a role then industry may not develop in those areas."