Spun out: N.B. government loses $80M as 2 textile mills fold
The New Brunswick government is on the hook for close to $80 million after two northern textile mills closed and filed for bankruptcy.
Atlantic Yarns in Atholville and Atlantic Fine Yarns in Pokemouche are the latest victims of the slumping economy and as a result, 360 people have been laid off in the province's already hard-hit northern region.
The two mills, both owned by Sunflag Canada, have struggled to stay afloat for years. Both companies filed for bankruptcy this week.
Robert Smith, the court- appointed monitor for the two companies, said the filing means unsecured creditors will get nothing.
"The province will end up at the end of the day with nothing being paid back to them," Smith said.
Since 1998, the province has given the companies almost $80 million in grants and loans. Now that money is gone, along with the jobs the money was intended to sustain.
Ryan Donaghy, a spokesman for Business New Brunswick, said the government has empathy for the people affected by the closures.
"The economic downturn has certainly affected many companies in New Brunswick and certainly has affected these operations," Donaghy said.
The closures come just months after the plants reopened under a restructuring plan.
Sunflag Canada said the bad economy is partly to blame for the failure of its two plants in northern New Brunswick.
Yarn prices have dropped and more than 1,000 textile mills that purchase yarn have closed in the past three months.
Smith said the companies are looking to sell the plants, but it's much more likely they will liquidate their assets instead.
Keith Steeves, president the Communications, Energy and Paperworkers Union Local 208, said workers met with Smith on Thursday to get a better understanding of what is happening with the mills.
"We're not too happy," Steeves said. "The northern part of New Brunswick got hit again, like always."
Although the workers understand the economic realities facing the textile industry, union members are extremely frustrated by the decision, Steeves said.
Union officials said they've been told potential buyers have been through the mills but they are realistic about the slim chances of it reopening.
"It's tough right now," Steeves said.
"We'll get through it because we're a tough bunch up at this part of the country."