HALIFAX – Some companies that defaulted on big loans from the Atlantic Canada Opportunities Agency have been frequent borrowers for over a decade, prompting a critic of the agency to wonder why the businesses weren’t cut off sooner from public funds. A list of writeoffs from ACOA, obtained by The Canadian Press, shows $13.9 million in loan losses were recorded between April 1, 2006, and March 31, 2007. The losses range from several million dollars in writeoffs in New Brunswick’s technology sector to $12,000 when Bugs Buzz Off Bugs Suit of Lower Sackville, N.S., went through bankruptcy proceedings. Some companies that failed received ACOA funding over 15 years, returning repeatedly for loans and subsidies between 1988 and 2005. They include: Ian Munro, the director of research at the Atlantic Institute for Market Studies, a right-leaning think tank, said the writeoffs raise questions about whether ACOA should continue funding companies on repeated occasions over many years. “First of all, if these are supposed to be subsidies to firms to get them up and running and this is going to promote economic development … then why do they need to keep coming back to the trough?” Munro said in an interview. “The need for repeated subsidies seems to suggest there is a fundamental lack of business case.” He said after an initial loan, it would be preferable if companies shifted to banks and private investors, rather than continuing to return under various loan and grant programs. “We have to wonder about why we have to keep pouring money into it, especially when … so many end up not being able to pay the loans back to the taxpayers’ detriment.” Richard Gauthier, a spokesman for ACOA, said it’s important to understand the agency does “careful due diligence” before it offers a loan or grant to a firm. He argues that at the time the funds were advanced, the companies met all of the agency’s requirements. “Basically, it’s after approval of assistance that the company may have come against a hurdle that they couldn’t get around,” he said. Problems such as a shortage of working capital and unexpected collapses in sales are difficult to predict, Gauthier said. “As a regional development agency, we are there for every step of the way for the development of a small, medium-sized firm in Atlantic Canada,” he added. “Each and every individual assistance goes through the same financial assistance, including the firm’s financial viability.” Gauthier said ACOA deliberately puts itself in a position of being an unsecured creditor to allow the company to go to other lenders and obtain credit. As a result, its losses are going to be higher than commercial banks or credit unions. Each Atlantic province had some high-profile collapses on last year’s books: Gauthier said that ACOA has given $960 million in loans since 1995 to 7,000 projects and that $415 million of that total has been repaid to date. He said annual losses of between $13 million to $15 million are not unusual. He said the agency expects there will be defaults on about 15 per cent of its no-interest loans.
