Minister comments on IPL

December 21, 1999
(Forest Resources and Agrifoods)

Kevin Aylward, Minister of Forest Resources and Agrifoods, today commented on the action by Integrated Poultry Limited (IPL) to seek creditor protection.

Minister Aylward said: "While it is disappointing to see that IPL has had to seek creditor protection, this will allow the company to continue to explore the possibility for restructuring its debt while continuing to operate.

"Government will continue to work with IPL in this very important endeavour. I want to make it clear, however, that while government will consider all options aimed at making IPL a viable operation, this will not extend to investing any new money from government. There comes a time when government can no longer justify making a further commitment of taxpayers' dollars. That time is now. What IPL needs is a private sector partner to provide additional equity and expertise."

Commenting on the history of the chicken industry in the province, the minister noted: "Newfoundland Farm Products Corporation was in operation as a Crown corporation from 1963 until October 1997. We have determined that from 1972 until 1997 it lost approximately $220 million of taxpayers' money as calculated in 1999 dollars.

"Successive governments, over that long period of operation, failed to turn the situation around. We have worked hard to try to develop a viable chicken industry in the province and to save as many jobs as possible. This has included privatizing the St. John's operation of Newfoundland Farm Products in October 1997 and passing of control to IPL, a cooperative venture owned by this province's chicken farmers.

"Since IPL was formed, the province has provided the company with an $8.5 million grant and an $11.5 million loan guarantee. Government has deferred debt of $1.5 million from the Newfoundland Farm Products Corporation. It has deferred principal payments on the loan guarantee for one year. Government has also provided a $1 million guarantee of working capital. In addition, government has relinquished security to allow the Farm Credit Corporation to secure its $3.1 million investment in IPL. Most recently, government guaranteed grain shipments in April and November.

"We have worked hard to try to save jobs and help the industry become viable. The financial assistance provided to IPL is about equal to the amount which government would have spent had the poultry industry remained under Crown control through Newfoundland Farm Products Corporation. Providing the assistance to IPL allowed for the modernization of the plant, equipment, barns and other facilities instead of continuing to subsidize losses by Farm Products. The fact that the infrastructure has been put in place will hopefully attract an equity investor that will lead to a viable poultry industry in the province."

Mr. Aylward noted that government recognizes the concerns of IPL employees. "Hopefully, the company will find a way to restructure and continue its operation."

Media contact: Cynthia Layden-Barron, (709) 729-6183.

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BACKGROUNDER

Chronology of Assistance by
Government of Newfoundland and Labrador
to Integrated Poultry Limited

July 1997	Government agreed to share losses of Newfoundland Farm Products Corporation until a deal was signed. IPL share of those losses was $960,000
October 1997	$3 million worth of NFPC assets sold to IPL for $1.
	Provided $8.5 million grant. IPL purchased $1.4 million worth of inventory on credit from NFPC. Payments to commence in January 1999. The outstanding payment of $150,000 operating losses, owed by IPL, was also deferred until January 1999. $10 million guaranteed bank loan. A $1 million deficiency guarantee relating to IPL's working capital loan. Under this arrangement government will pay, to the bank, any shortfall up to $1 million after the bank has sold IPL's inventory and collected its accounts receivable.
Nov/Dec. 1997	As required under Loan Guarantee agreements, government authorized IPL to purchase Masterfeeds feed mill at Donovan's Industrial Park.
Jan/Feb 1998	To finance additional capital costs at processing plant and production facilities, IPL borrowed $2.1 million from FCC. The province released security on the feed mill assets to FCC as part of this transaction.
Oct/Dec. 1998	IPL acquired an additional $3.5 million in financing to finance additional costs and operating losses: $1 million from FCC; $ 1 million from shareholders; and a $1.5 million increase in the bank loan guaranteed by the province. As part of the shareholder investment the province released $200,000 from the producer's trust account which was securing its $10 million loan guarantee and guaranteed a separate $400,000 shareholder's loan which has been repaid. In addition, NFPC deferred its $1.5 million payment in January 1999 to January 2000 and also deferred principle payments on its $10 million loan from January 1999 to January 2000.
April 1999	NFPC purchased a grain boat shipment using a guaranteed bank loan of $1.7 million. Subsequently, it was sold to IPL.
Nov. 1999	NFPC purchased the second grain boat shipment using a guaranteed bank loan of $1.7 million. This grain is currently stored in Long Pond, in silos rented by NFPC from IPL and will be sold to the livestock industry including IPL, as required.
March Onwards	Government and the bank agreed to allow IPL to continue to operate even though a number of conditions under the loan agreements were in default. This was done in an effort to allow IPL to seek potential investors. Worked with IPL and potential investors to seek solutions for the long term continuance of IPL and the poultry industry.
Dec. 15	Scotia Bank demanded payment of the province under its $11.5 million loan guarantee and demanded IPL pay its working capital loan of approximately $5 million.
Dec. 16	Government paid the bank its $11.5 million, as required under the loan guarantee.
Dec. 20	Provincial government demanded IPL pay the province its $11.5 million loan. IPL has 10 days in which to respond.

1999 12 21 2:15 p.m.

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