CALGARY – The Alberta government has agreed to write off $15 million in loan guarantees to Fletcher’s Fine Foods.
In 1990 the government guaranteed two loans to help the pork processing company borrow money and buy an American processor, Golden Gate Fresh Foods.
Golden Gate ultimately failed in 1991 when it defaulted on a $15 million loan, also guaranteed by the province. Golden Gate remains in receivership. Losses are still being calculated but are estimated at $12.5 million, said a government report.
In addition, Fletcher’s had a $5-million guarantee and will repay $2.65 million of that.
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The major condition of the settlement requires that the Alberta Pork Producers’ Development Corporation complete the transfer of ownership of Fletcher’s to Alberta hog producers.
About eight million shares will be offered to producers who sold hogs from 1981 to 1985. This is referred to as the extra levy period, when producers paid a special checkoff allowing APPDC to buy Fletcher’s. Under this agreement those producers will receive one share per hog sold during that time.
The debt write-down gives the company some room to manoeuvre. Its share transfer stalled last year because the company’s lender said it didn’t have enough equity.
“Our latest stumbling block, when we filed a preliminary prospectus last year with the securities commission, was that the bank had to agree to the transfer of ownership. The bank said the transfer would not take place without some cash injection,” said APPDC chair Jurgen Preugschas.
To raise more money, the APPDC will guarantee the sale of $5 million worth of additional shares. This separate share issue will be offered first to producers, with a time payment plan.
“In our agreement with the government we, the APPDC, must be rid of all shares in Fletcher’s within a two-year period. Come hell or high water, those shares must be gone,” he said. If producers don’t buy them all, the shares will be sold to outside buyers.
Fletcher’s is filing a new prospectus with the Alberta Securities Commission so shares could be available by year end, said Preugschas.
Liberal agriculture critic Ken Nicol said the agreement is a good deal for the pork industry, coming at a time when the government faces taxpayer outrage over guaranteed loans to private business.
“It gets the government out of the pork industry, finally,” said Nicol. “There was very little chance of them ever getting those dollars back anyway, and what we were ending up with was another fiasco like we had with Gainers.
“From the Fletcher’s perspective they can now operate as a business … with no government influence.”
If Alberta’s pork industry wants to stay competitive with other North American processors, plants must modernize and expand. Otherwise it will always be a second rate player, said Nicol.
“We’ve got producers who can produce pork competitively with any producers anywhere in North America. If we’re going to give them a market option in Alberta, we’ve got to have the plants that can compete as well. Now we have the environment where the plants can make the decisions they have to, to get on with it,” he said.
The province seized the Gainers pork plant four years ago, after owner Peter Pocklington defaulted on business loans. The company was sold to Burns Foods last year at a loss of $172 million.
