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Details sketchy on Arslanian loan guarantee

Stephan Burnett
Northern News Services

Yellowknife (June 28/04) - Arslanian Cutting Works Ltd. is about to get new owners, but the territorial government and taxpayers are still on the hook for a loan guarantee.

NNSL Photo/Graphic

Joie Mayordo polishes a diamond for Arslanian Cutting Works Ltd. in Yellowknife. Arslanian has secured a white knight in Basal Diamonds and Polar Ice Diamonds. The companies, based in Montreal, are promising to pay out Arslanian's $9.1 million Royal Bank loan, which was guaranteed 100 per cent by the territorial government. - Stephan Burnett/NNSL photo

"The new loan guarantee will be based on the total value of their assets," Finance minister Floyd Roland said Thursday.

Julia Mot, communications co-ordinator for the NWT cabinet, said the guarantee would not extend beyond five years.

The new partners in the Yellowknife factory are Basal Diamonds, Olympic Diamonds, Arslanian Cutting Works and a fourth company that has not been identified.

Arslanian's new shareholders are to pay off the factory's $9.1 million Royal Bank loan, which is guaranteed by the territorial government. The money was to be transferred today.

Roland does not know the size of the guarantee the new partnership will be seeking.

"It's a floating guarantee; we haven't figured out the top end of the company value or the assets in place," he said.

"Our intention is not to put ourselves in without having assets in place to secure that."

Arslanian's financial projections and the value of the company's assets will determine the extent of the territorial government's involvement, said Roland.

"The first condition is that they pay out. Once that is done, we will have our staff work with them to bring it forward to the Financial Management Board. That (submission) will include all those details," Roland said.

The Supreme Court appointed an interim receiver for Arslanian Cutting Works and Sirius Diamonds on June 4 at the request of the government, which has also guaranteed an $8 million loan to Sirius.

Roland said the move was made because the companies' debt levels exceeded the terms of the loan guarantees.

Both Arslanian and Sirius maintain they never missed a loan payment.

Sirius Diamonds filed a notice of intent under the Bankruptcy and Insolvency Act in British Columbia Supreme Court on June 14.

The move gives Sirius 30 days to negotiate a restructuring deal, said Susan Ben-Oliel, a lawyer with the company and wife to company president Stephen Ben-Oliel.

Roland said he is not uncomfortable with Sirius moving the court jurisdiction from the Northwest Territories to B.C.

"We have our receiver in place," Roland explained.