Bixi owes $50M, files for bankruptcy protection

Bixi has applied for protection from its creditors and the City of Montreal is taking over the localoperation of the popular bike-sharing service.

Montreal Mayor Denis Coderre made the announcement Monday afternoon.

If Bixi can be saved, its through the Bankruptcy and Insolvency Act," Coderre said.

Bixiis in bankruptcy. We have to admit that.- Richard Bergeron, Projet Montreal

The company that owns Bixi the Public BikeSystem Company, known in French as theSocit devlosenlibre-service (SVLS) owes $50 million to various creditors, including the City of Montreal.

Coderre said rather that sinking more money into the SVLS, a private company,the city would takeoverBixi'sMontreal assets. He said they areworth approximately$11 million.

"Bixi is in bankruptcy. We have to admit that," said ProjetMontreal Leader Richard Bergeron, who supported Coderre'sdecision to take over the service.

Bixihas been expensive for Montreal

In 2011,Montreal's city council approved a $108-million bailout package for the program to cover a budget shortfall. That included a $37-million loan to coverBixi'sdeficitand another $71million in loan guarantees to export and develop the system abroad.

• Explainer: What is bankruptcy protection?

Michel Philibert, the interim CEO of the SVLS, said the company will work with the City of Montreal to ensure the service rolls forward this summer.

"In the next few days were going to initiate a process and well need to work with the City of Montreal to ensure the 2014 season of Bixi, and the second objective is to protect the value of the investment the City of Montreal made in SVLS," Philibert said.

The mayor said he believes Bixi was, and continues to be, a good idea and a valuable public service, but that the company's financial problems forced him to act now rather than later.

Coderre said he wasn't happy to hear about the seriousness ofBixi'sfinancial problems upon taking over as mayor of Montreal in November.

Bixi is a good idea," Coderre said."I want there to be a Bixi season this summer.

$1.5M losspredicted for 2014

City officials said they expect a $1.5-million loss on Bixi this year because of restructuring. Still, Coderre said, he believes the service can be viable.

Bixisaid cash-flow problems began when it tried to develop new proprietary technology for international clients.

Persistent delays and problems with the technology prompted many clients to withhold payments Chicago and New York refused to pay out $5.6 million to Bixi because of the prolonged snags in the development of each city's bike-sharing service.

The STM, Montreal's public transit authority, would not comment on today's announcement.