Major NTCL contract cut short as company mulls sale of its tugs and barges

The N.W.T. government has cut short a $110 million contract with Northern Transportation Company Ltd. (NTCL) to sealift bulk fuel to several marine-supplied communities, as the foundering Northern shipper takes steps to potentially sell its tugs and barges.

In 2013, NTCL won the multi-year government contract to move about 20 million litres of fuel a year to communities along the Mackenzie River.

But with NTCL recently placed under court protection in order to stave off bankruptcy, the territorial government is planning for the worst-case scenario.

N.W.T. minister of Public Works and Services Caroline Cochrane told MLAs last week that NTCL will continue its deliveries this summer.

After that, however, NTCL's six-and-a-half-year contract which was supposed to last until late 2019 will come to an end.

"On May 25 of this year the department has issued a new tender for a multi-year fuel supply and delivery contract to serve the eight marine accessible communities" said Cochrane.

"The contract, once approved, will begin in 2017 and it will be a multi-year contract similar to NTCL."

Government looked for NTCL alternative early

A recently sworn affidavit suggests the territorial government was shopping for an NTCL replacement before NTCL formally sought creditor protection in late April.

It also suggests that NTCL, which has been operating on the Mackenzie River for nearly 80 years, has plans to exit the marine shipping business.

One of the companies that NTCL owes money to is Vancouver's ITB Marine Group Ltd.

ITB lost the 2013 fuel delivery contract to NTCL after ordering four newly-built, double-hulled barges in anticipation of winning the contract.

ITB says it agreed to sell two of the new barges, plus 17 other vessels, to NTCL for $12.9 million. NTCL was to pay ITB in monthly instalments.

According to an affidavit sworn last month by ITB's vice-president of finance, Jim Lochhead, NTCL stopped making its boat payments around February.

After ITB was unable to reach anybody at NTCL by phone or email for a week, Lochhead finally reached Leslie Kwasny, the chief financial officer of NTCL's parent company, NorTerra, over the phone.

According to Lochhead, Kwasny said "she is aware that NTCL is behind on the payments, that they are having cash flow problems and are working on a solution to the problem with the Inuvialuit Development Corporation," the business arm of theland-claim group for the Inuvialuit people of the N.W.T.

By the end of March, Lochhead was dealing with Jim Kinney, chief financial officer of the Inuvialuit Corporate Group.

"Jim tells us there are changes at NorTerra...NTCL won't pay either of the outstanding hire payments, and he can't share any other information," Lochhead recalled in his affidavit.

Lochhead asked Kinney about rumours that NTCL's government contract was in jeopardy.

"He says, 'No comment, but you can make your own interpretation of that answer.'"

Lochhead says ITB was then approached about its double-hulled barges by two companies who claimed they were sought by the government "as an alternative to NTCL."

'Exiting the marine business'

ITB began again pressing NTCL for the boat payments in early April.

During a conference call later in the month, Kinney said that after the 2016 sailing season, "NTCL would be exiting the marine business and that they were inviting us to talk about taking over the business of NTCL," according to Lochhead.

"Kinney also tells us 'how cold it is up there' and that 'it wouldn't be any fun going up to get the equipment.'"

ITB declined NTCL's offer and insisted on being paid the balance of the purchase price for the barges and vessels, around $9 million.

"The call concluded with Jim Kinney saying that they would 'lawyer up' and do what they had to do to fight this."

Lochhead concluded his affidavit by saying he believes NTCL deliberately decided not to make its payments.

Nathan Graham, the chief corporate officer of the Inuvialuit Regional Corporation, emailed a brief statement to CBC News on Sunday.

"It's important to restate that the 2016 season is proceeding. All other matters are before the court and so we're not able to provide further comment at this time."

NTCL'screditor protection extended

Last week the Court of Queen's Bench of Alberta extended NTCL's protection from creditors like ITB by several more months, to Sept. 22. NTCL believes it has enough money to operate until then.

The court also allowed NTCL to proceed with a sale and investment solicitation process, which allows the company to seek investors or buyers for the company or its assets.

"Management believes that this process will allow full exposure of NTCL and its assets to the market and identify potential strategic alternatives or acquirers for either the business as a going concern or certain of its assets," the company's vice-president of finance, Kyle Barsi,wrote in a May 20 affidavit.

NTCL has hired Texas-based Blackhill Partners LLC which has "extensive experience selling numerous and varied businesses," according to the affidavit as its financial advisor. Blackhill's monthly retainer fee is $65,000.

The first round of bids for NTCL's assets are due by July 8.

The assets include 12 marine tugs and more than 60 fuel-and-cargo barges, and are worth $44.9 million.

That's nearly three times what NTCL owes ITB, several banks and groups like the Town of Hay River.