Shareholders of a northern Alberta hog barn have told bankers they will not come up with another $250,000 to meet the bank’s debt-to-equity ratio, said the chair of MacKenzie Pork.
Craig Reid, chair of the four-year-old MacKenzie Pork in La Crete, said shareholders agreed during a May 27 meeting they were not going to invest more money in the business.
“If they’re not prepared to work with us, they can have the barn,” said Reid of La Crete.
In a letter to management, the CIBC in High Level, Alta., said MacKenzie Pork had 14 days to come up with $250,000 to its improve its debt to equity balance. Of that money $210,000 must be applied to the principal of the loan. It cost $4.5 million to build and stock the barn when it was built in 2000. MacKenzie Pork carries an overall debt of $2.5 million.
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But with hog prices improving for the first time in almost two years, the shareholders think the bank is lacking flexibility in its demand for more money, said Reid, one of the 91 people who invested a total of $1.7 million to build the 600-sow barn in their northern community in 2000.
Of the original shareholder investment, $675,000 came from investors’ registered retirement savings plans.
Shareholders have since kicked in more than $900,000 during the last two years to keep the business going, in addition to the $1.7 million original investment.
While the group has not missed a payment to the bank, its local feed suppliers and millers have placed it on a cash-only policy.
“To have everybody put you on cash and the barn manager phoning you every day saying ‘how am I going to pay this, how am I going to do this,’ it’s stressful,” said Reid.
Few investors are willing to push ahead with the United States threatening a countervail duty on Canadian hogs entering the U.S.
Many investors are loggers, already hit by an American duty on softwood lumber, and they know the hardship it can create.
In addition to low hog prices, the hog industry has been hit by a drastic increase in power, gas and insurance costs.
Under the payment schedule set up by the bank when pork prices were low and feed prices high, the company had the option of making interest-only payments, which they have done for 21 months.
Reid said it’s frustrating the bank is requesting more money, when it has been paid each month.
“I see them as an equal investor in this. They’ve been getting their money and we haven’t.”
Serge Martin, account manager for MacKenzie Pork at CIBC, did not return Western Producer phone calls.
