DME owed $18M, according to documents filed by Royal Bank of Canada

According to documents filed in P.E.I. Supreme Court by the Royal Bank of Canada (RBC) Diversified Metal Engineering (DME), and certainguarantors, owedthe bank $18,100,924.38, as of Nov. 22, 2018.

The company was put intoreceivership Nov. 26, after RBCreported DMEhad defaulted on payment.

The receiver, Alvarez &Marsal, was called in by RBCand appointedby the court. RBCsays the company did not oppose the appointment of a receiver.The court order statesno one appeared atthe receivership hearing forDME.

Diversified Metal Engineering is a P.E.I.-based company that builds brewing systems for the craft beer industry. It also makes a range of stainless steel products for other industries. It had been in business for 27 years.

According to an affidavit sworn by a senior director of RBC DMEhas 150employees at its P.E.I. operation and 100 employees at its location in Abbotsford, B.C.

Problems with acquisition, increased competition

In the document RBCsays all of the directors of DMEhave either resigned or will be resigning.

The bank's affidavit states RBC was informed by DMEthat its financial position declined due to "challenges related to the acquisition of the assets ofNewlandsSystems Inc....in Abbotsford B.C....a drop in revenue due to increased competition...dealing with certain unfavourable customer agreements...and significant infrastructure costs."

RBCstates DMEalso hired an outside financial advisor along with a"turnaround specialist"to help with the situation.

The bankstates the companywould have required $5M in new capital to have continued, butaccording toRBCthe company hadno commitmentfromanyone to provide that money.

RBCsaid it was advised by DMEthat the company was up to date on all sales taxes and government remittances.

On Tuesday thereceiver saidit plans to sell the business as a going concern with the hope of finding a buyer to reopen the company, and that it would be calling some workers back to complete projects.

The receiver said it will be paying employees owedwages and accrued vacation.

CBChas reached out to former DMEmanagement but has not received a response.

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