Atcon refinancing adds more risk to N.B.

The New Brunswick government may have a more difficult time recouping millions of dollars from the Atcon Group because of a decision to refinance some of the troubled company's loans last fall, CBC News has learned.

The Miramichi-based company's main lender, Scotiabank, has filed documents in the Court of Queen's Bench this week asking the court to place Atcon in receivership.

That could see the construction company's assets sold off to repay the bank first and the province second.

Last fall, the New Brunswick government actually became more exposed to added financial risk in the Atcon deal.

Three months after the provincial government made three loan guarantees worth $50 million, Atcon went through a refinancing that saw Scotiabank lend the company even more money. The amount handed out by Scotiabank is unknown.

In return for that, Scotiabank and the provincial government agreed the bank would get a higher security position than the province for some Atcon assets if the company ran into problems.

What that means now that Atcon is heading for receivership is that the bank and not the New Brunswick government, is first in line to seize and sell some Atcon assets to cover its loans.

If the province hadn't made the agreement last fall, taxpayers would be first in the queue for those assets and would be able to recoup more money.

The province has given Atcon a total of $70 million dollars in loan guarantees and other loans.

A receivership hearing is scheduled for Monday in Miramichi.

Protecting taxpayers

Business New Brunswick Minister Victor Boudreau told the legislative assembly on Friday that the bank still has not demanded any money covered by the loan guarantees.

Although the amount of money New Brunswick taxpayers could be left on the hook for is uncertain, Boudreau said the province will fight to limit its potential losses.

"We are going to do everything we can to protect taxpayers, the interests of the employees at Atcon and the interests of the City of Miramichi and all the other communities in New Brunswick that are affected by this decision," he said.

Progressive Conservative MLA Bruce Fitch continued to grill the Liberal government on Friday over the $50 million in government loan guarantees.

In the legislature, Fitch asked Boudreau what the province did to make sure taxpayers were not exposed to potential loses.

"Because of the [uncertain global economic] situation, I am trying to get to the bottom of whether the due diligence was followed and whether or not the level and amount of due diligence that was put forward was the right amount to take on this significant risk for the province of New Brunswick," Fitch said.

"Will the minister tell us whether the due diligence level was higher or lower than normal cases that are brought to Business New Brunswick?"

The Progressive Conservatives want the legislature's public accounts committee to look at the government's handling of the Atcon loans.

Hurting economy

Atcon's latest financial problems are troubling to Miramichi Mayor Gerry Cormier

He said with local mills shutting down in recent years, the economy of the northern city is hurting.

"Today, this is another nail in the coffin," Cormier said.

Problems started for Atcon last fall, when former employees and contractors began suing or threatening legal action to have outstanding bills repaid.

And in January, Atcon was removed from the $165-million Deh Cho Bridge contract in the Northwest Territories after it couldn't agree on terms for the second phase of construction with the bridge's developer.