Taxpayers unlikely to recoup loans to Industrial Rail
Moncton's Industrial Rail received $20.5M in provincial money before going bankrupt
New Brunswick taxpayers are unlikely to recover much of the $20.5 million in money invested in Moncton’s Industrial Rail Services, which was placed into bankruptcy last week.
Industrial Rail Services was one of several companies that received provincial funds during the economic downturn in 2008.
Moncton businessman Richard Carpenter owned Industrial Rail, a company that bought decommissioned passenger rail cars and fixed them up for reuse.
The concept worked for a while with the company supplying vintage cars for VIA Rail's popular service through the Rockies. Industrial Rail had a $109-million contract with Via Rail to refurbish 98 train cars.
But Industrial Rail fell into trouble. The provincial government announced earlier in 2012 it was seeking a court-appointed receiver for the company, saying Industrial Rail failed to repay its loans.
The company received $10.5 million in loan guarantees in 2008 and then in 2009 the provincial government offered a $7.5-million term loan and a $2.5-million non-repayable loan.
In total, Industrial Rail received $20.5 million in provincial funds with less than $3 million in company assets left to pay any of it.
Taxpayers were also left on the hook when Miramichi’s Atcon fell into financial hardship. The Atcon group of companies filed for bankruptcy in early 2010.
In 2009, the Liberal government of Shawn Graham extended three different loan guarantees to Atcon worth a combined $50 million. In total, Atcon received about $57 million.
In 2012, a judge approved a payment of almost $341,000 to the provincial government.
The New Brunswick government may get an idea of how much money it will receive from Industrial Rail next week.
Ernst and Young, the bankruptcy trustee overseeing Industrial Rail, has invited the company’s creditors to a meeting in Dieppe next week to sort out who will receive any of the company’s assets.
But it has already been made clear that, such as in the Atcon case, there are just pennies on the dollar to go around, including for the $20.5 million owed to New Brunswick taxpayers.
The provincial government may not be able to recoup much of the money it loaned the Moncton company. But last fall, a deal was struck to maintain jobs at the Moncton facility for 19 more months.