Isobord Enterprises Inc. has been given another 30 days of protection from its creditors while it tries to restructure its debt and avoid being placed in receivership.
The strawboard manufacturer at Elie, Man., was originally given a month in early December to complete its financial restructuring.
However, Christmas holidays trimmed the time available for discussions between the company and its creditors. That prompted the court decision to extend the protection from creditors to Feb. 2.
“I think things are going very well,” said Jan Lederman, Isobord’s acting chief executive officer. “We’ve already met with all the lenders and gotten feedback from them.”
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Isobord owns the largest strawboard manufacturing plant of its kind in the world. The $150 million plant was built in 1997 and has been selling its product internationally.
Company officials say flaws in the plant’s engineering have kept it from reaching full production, which has made it more difficult to assure Isobord customers there will be a steady supply of product.
“Demand really hasn’t been the problem,” said Lederman.
“Customers like the product.”
Isobord’s debts include $57 million owed to a consortium of banks. Other lenders include Farm Credit Cor-10-P. and Manitoba Development Cor-10-P.
Neither would comment on how much they’re owed.
Lederman said the lenders are disappointed with the company’s
financial position, but remain supportive of the strawboard plant concept.
Dan Bergen of FCC said there are two angles Isobord can take when negotiating with creditors. It can ask for forgiveness of part of its debt, or it can ask lenders for more financing to help the company carry on.
He wouldn’t speculate on which way the negotiations might go.
Bergen believes the company’s complaints about the engineering of the plant are credible. He said he has found no evidence to suggest markets are a problem for Isobord.
“The biggest problem they face is they can’t get the output they projected they would need to break even or to make money.”
FCC originally became interested in helping finance the strawboard plant because it meant economic development for a rural area. The venture also benefits the environment because it manufactures building materials that are an alternative to forest-based products.
As well, it creates a market for straw grown by local farmers. Isobord bought 100,000 tonnes of straw last year at $8.30 a tonne.
“We’d like to see this thing fly,” Bergen said.
“We’d like to see it succeed, because there does appear to be a market out there (for Isobord product).”
