Sawmill failure casts doubt on millions in P.E.I. government loans
$2.8M in loans from 2007 turns to $3.7M in debt as company goes into receivership
Millions of dollars' worth of provincial government loans sit in limbo as a court-appointed receiver prepares to sell off almost 100 different properties connected to a sawmill company from western P.E.I.
Arsenault Sawmill Ltd. of Richmond went into receivership almost a year ago owing the P.E.I. government more than $3.7 million. That was after the company had submitted a proposal to creditors which saw it pay off some of its debts, including payments for payroll taxes owed to Revenue Canada and overdue property taxes owed to the province.
The P.E.I. government provided the company with $2.8 million in loans back in 2007. According to court documents filed by a trustee with BDO Canada, the company failed because of "financial issues … accumulated over a period of years as a result of the slowdown in the forestry industry."
'High-risk loan,' government said at the time
Back when the loans were first provided to the company, the industry was already struggling. Irving-owned Georgetown Timber had just shut down.
"I'm not going to colour-code it any way, it's a high-risk loan," former development and technology minister Richard Brown told CBC News at the time. "We could have let this company go bankrupt and hurt a lot of people in the area."
At the time Arsenault Sawmill employed about 50 people. Local MLA Sonny Gallant, now Minister of Workforce and Advanced Learning, lobbied in 2007 for the company to receive the loans.
Sale not expected to cover debt
This week a spokesperson for the province said there won't be any calculation on possible financial losses until after the property sale. The company acting as receiver PricewaterhouseCoopers said it's had the properties appraised, and doesn't expect their sale will generate enough revenue to cover the company's outstanding loans with the province.
According to PricewaterhouseCoopers, the properties include woodlands, clear-cut areas and some agricultural land, and their combined assessed value for taxation purposes is approximately $1.8 million.
The province is by far the biggest remaining secured creditor, with the company left owing government $3,710,388, according to PricewaterhouseCoopers. A spokesperson for the Department of Innovation and Advanced Learning said he could not clarify why the amount owing was larger than the initial loan amount, or whether the extra represents unpaid interest.
New company incorporated in 2016
The Evangeline-Central Credit Union is the only other secured creditor listed in documents from the receiver, still owed $160,000, while a further 28 unsecured creditors are owed a total of $208,568.
A new company, Arsenault Sawmill (2016) Ltd., was incorporated in P.E.I. in December 2016. According to PricewaterhouseCoopers the new sawmill company retained equipment from the former Arsenault Sawmill Ltd. and a parcel of land as part of its proposal to creditors, and is still involved in chipping operations and the transportation of wood products.
Government said it has provided no financing and has no contracts with the new company.
CBC News contacted Arsenault Sawmill (2016) by phone, but no one with the company responded to a request for more information.