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Discovery loan paid back earlyNorthern aviation giant flourished with $34-million loan from NWT opportunities fund
Northern News Services
Published Wednesday, April 4, 2012
The loan agreement was finalized in February 2009 when the company was mulling major job cuts amid a $33-million debt.
The company announced last week that the debt owing to the opportunity fund has been repaid in full, 10 months earlier than the scheduled due date of Feb. 1.
"Now that it's paid back, the loan did go to helping a Northern company keep jobs here in the NWT in a rough time," said David Ramsay, minister of Industry, Tourism, and Investment. "And they have been able to keep their employee base here and plan the future and they have been successful at that."
As a condition of the $34-million loan, Discovery Air moved its headquarters to Yellowknife from London, Ont., and, despite no longer being tied to the loan, the company is here to stay, said Sheila Venman of Discovery Air investor relations.
"We have, I think, around 450 to 500 employees with our Northern companies," Venman said. "We are very proud to be a Yellowknife-based public company. Our head office is up there, and we don't intend to move it."
Since the economic downturn in 2009, when the company took advantage of the opportunities fund to take on the 48-month term loan, the company's operations have rebounded, with Discovery Air's strategic growth path seeing the introduction of new subsidiaries, fleets and joint-venture partnerships.
"The agreement with NWTOF allowed us to maintain and grow our Northern employee base significantly," stated Dave Jennings, CEO of Discovery Air, noting the company has grown to more than 850 from fewer than 400 employees across Canada in 2009.
"The relationship with NWTOF allowed us to build our business, while contributing significantly to the Northwest Territories through the payment of interest on the loaned funds," Jennings said.
"It is an excellent example of the private sector and government working together."
Interest from the Discovery Air loan makes up the most of the $6.5 million of residual money in the opportunities fund, which is going to be earmarked for economic development initiatives around the territory, Ramsay said.
Finance Canada was looking at the fund as part of the territory's overall debt, Ramsay added, so it became a hurdle when the GNWT wanted to raise its borrowing limit.
Despite annually accruing interest, the GNWT was eager to resolve the loan with Discovery Air because it was the only factor in the way of repaying the federal government back for the program, which is now defunct.
To make the early repayment, Discovery Air took advantage of other financing deals, Venman said, including private loans with a combined average interest rate of 5.2 per cent at closing - almost half the interest rate of the opportunities fund loan of 10 per cent per year.
While the territory has a number of other business assistance programs established through government-funded organizations such as the Business Development Corporation and Community Futures, the territorial government would never have another opportunity where it could lend up to $34 million again, Ramsay said.
"This was more of just a one-off," he said. "We just don't have the capacity to be lending that kind of money and this was an opportunities fund that really came at a critical time for Discovery Air and helped keep jobs here in the North, so it was a win-win for both of us."
Discovery Air has 35 bases across Canada - in the NWT, Nunavut, Ontario, British Columbia, Alberta, Manitoba, Quebec, and Nova Scotia.