As part of its plan to recover $25 million in loans, a Calgary-based lender is looking to acquire Petrowest’s civil and rental divisions.
Crown Capital Partners, a mid-market business lender, says it’s formalizing an offer to acquire all of Petrowest’s civil and rental divisions, noting the two are key to the recovery of its loans.
“We look forward to finalizing our offer to acquire the civil and rental divisions as soon as possible,” Crown President and CEO Chris Johnson said. “We believe these are well run operations with long histories of profitable operation that meet our high quality investment standards.”
Included in Crown’s outstanding loans are a $15-million term loan entered in September 2015, and a $12-million bridge loan granted in May of this year.
Petrowest, placed in receivership Aug. 15, announced plans to sell its civil division, which includes R Bee Crushing and SOS Oilfield Safety, back in March. It had $46.9 million of listed assets held for sale in its most recent financial statements, and noted it expected to close the sale within the next year.
Meanwhile, Petrowest owes a banking syndicate of lenders $26.1 million, according to court documents. The syndicate is led by the Bank of Montreal and also includes the Royal Bank of Canada, Canadian Western Bank, and Alberta Treasury Branches.
“Petrowest has failed to pay the outstanding indebtedness, is unable to pay its obligations generally as they come due, and has presented no viable plan or course of action to pay the outstanding indebtedness or address its immediate liquidity requirements,” an application for receivership filed by the Bank of Montreal states.
Those requirements include $1.9 million in payroll obligations, though the banks funded roughly $250,000 of payroll obligations earlier this month, the documents note.
Revenue up, but Site C work offers slim returns
Petrowest officials have not returned multiple calls for comment. Officials with Ernst & Young, appointed as the company’s receiver, declined comment.
However, Petrowest’s second quarter report sheds light on its financial picture, which shows an increase in revenues across most of its business divisions so far this year.
Overall revenues have jumped 46 per cent to $49.9 million in the first six months of 2017 on the back of increased civil infrastructure and oil and gas activity in Western Canada, along with increased business in its transportation and rentals divisions.
Still, the company has posted losses of $6.2 million so far this year, on top of $38.7 million of losses posted in 2016.
The company is also carrying $63.8 million in long-term debt, along with $29.4 million in other contractual obligations, and was sitting with a deficit of $89.7 million at the end of June.
“The company currently has insufficient cash to fund its operations and repay current obligations for the next twelve months,” the company writes in its analysis.
“As a result there are material uncertainties that may cast significant doubt upon the company’s ability to continue as a going concern.”
Petrowest has been sent a termination notice from the Peace River Hydro Partners consortium over its financial difficulties, and for failing to put up its $15 million share of working capital to cover the costs of day-to-day construction operations on the $8.8-billion Site C dam.
Petrowest held a 25 per cent stake in the consortium’s $1.75-billion contract to build the dam, while ACCIONA and Samsung C&T Canada Ltd. each held 37.5 per cent.
Petrowest’s financials show partnership revenues for Site C construction were up 671 per cent to $259.7 million in the first six months of this year.
“These increases are due primarily to the fact that the project was not operational until the second quarter of 2016, whereas the project has been fully operational and at capacity throughout 2017,” the company writes.
Of the revenues, Petrowest’s share amounted to $64.9 million, however, the company only realized $1.9 million of income before tax. The company has been renting 60 pieces of equipment to the partnership for dam-related construction work.
In a statement, BC Hydro put its confidence behind Acciona and Samsung to carry on construction without Petrowest.
“Acciona and Samsung are large multi-national companies with extensive experience in large infrastructure projects,” spokeswoman Mora Scott said.
“We’re confident that the two remaining partners have the resources and ability to perform and deliver on the work they are contracted to provide, and we do not expect this development to have any impact on construction or employment on the project.”
Energy Minister Michelle Mungall declined comment.
“Their contracts are with BC Hydro, and so how that will play out in terms of BC Hydro’s work is something that they have to steer,” Mungall said.
“That being said, this will no doubt be a part of the review that the BCUC does.”