FREDERICTON – The provincial government has confirmed it will give $50 million in loan guarantees to Miramichi-based Atcon Group, a move critics say transfers the risk away from banks and onto the shoulders of New Brunswick taxpayers. Acting Business New Brunswick Minister Jack Keir announced yesterday that government has reached an agreement in principle, which should be finalized next week, to give three loan guarantees to the company. Keir said the assistance is necessary to save jobs in the Miramichi region, which was hard hit by a number of mill closures. “It would be unconscionable for the government of New Brunswick to turn its back on the people of Miramichi at this time,” he told the legislative assembly. A $20-million loan guarantee will refinance an existing high-interest loan the company owes a bank and must be paid by June 2010. Another $20-million loan guarantee will be used to increase the company’s operating credit and expires in 2013. As well, government will guarantee a loan worth $10 million, with a term of eight years, to expand the company’s steel fabrication operations. “We’re not giving them any money,” Keir said, likening the agreement to co-signing a mortgage. “As long as this company remains successful, continues to grow, continues to get new contracts, all this is is a co-signing of a loan.” There are still questions, however, about how much taxpayers are at risk if the company doesn’t succeed. Kevin Gaudet of the Canadian Taxpayers Federation questioned whether Atcon was becoming the “General Motors of New Brunswick.” “They’ve been given money in good times; they’re getting money in bad times. When isn’t there a time to give this company money, according to the government?” he asked. If banks aren’t willing to give a company a loan, governments shouldn’t be stepping in to take on the risk, he added. “If this company isn’t sufficiently viable for the private sector to support, then the taxpayers shouldn’t be doing it either.” But Robert Tozer, president and CEO of Atcon Group, dismisses the idea that the company is receiving a bail-out. The economic crisis has made it extremely difficult for companies around the world to access capital, putting potential projects in jeopardy, he said. The company has been working on securing a number of projects and it’s important that the company can show it has access to necessary funding, he added. “We don’t see this as any significant risk to the taxpayers. There’s certainly lots of collateral put up for security on this potential deal,” he said. “We’re paying significant money for this loan guarantee as well. We pay $750,000 a year for this loan guarantee just for (government) to sign their signature.” The company hires up to 1,800 employees and Tozer said he’s optimistic the company will be able to expand its workforce once the company begins work on new projects. Details of the agreement made available by government yesterday outline a number of conditions attached to the loans. Atcon must establish an advisory board, that includes one member appointed by the government, to oversee major business decisions. The company must also develop a payment plan for money owed to New Brunswick suppliers. Tozer wouldn’t say how much Atcon owes New Brunswick businesses but said the company has many suppliers. As well, Atcon will not be allowed to compete against other provincial construction companies for government contracts or sub-contracts, excluding the supply of asphalt and aggregate in “volumes not to exceed the previous year.” The company must also seek government permission to provide construction work under any public-private partnership contracts held by Brunway Group. “They can bid on any job they want in New Brunswick,” said Keir, adding more than 90 per cent of Atcon’s work is exported. “But if there’s another New Brunswick company that bids against them, they have to disqualify themselves from the bidding process. I think that’s fair.” Rumours of the Liberals stepping in to help Atcon have been circulating for weeks, prompting a number of questions about whether government was creating an unfair playing field for other construction companies. Despite the conditions, Opposition leader David Alward said New Brunswickers need to know more details. “There’s no discussion on what type of direction or conditions are being taken to ensure taxpayers’ risks are minimized,” he said. “Even though this is a loan guarantee, there are too many examples out there of other loan guarantees that were defaulted on and New Brunswick taxpayers have been left holding the bag.” Charles Cirtwill of the Atlantic Institute for Market Studies said government chose the “least offensive” choice in deciding how to help the company. A loan guarantee is a better choice than giving Atcon a loan or a grant, he said. But that doesn’t diminish the risk to taxpayers entirely, he added. In a statement, the New Brunswick Business Council praised government for providing loan guarantees. “Actions by the provincial government to provide loan guarantees to core provincial enterprises are timely and welcome,” said Denis Losier, chairman of the council.
