Gray Aqua employees make sure the mooring is in place at one of the grow-out sites. — Submitted photo
Beleaguered aquaculture company Gray Aqua has filed for bankruptcy protection, owing nearly $40 million to creditors, including taxpayers.
Documents obtained by The Telegram show that the New Brunswick-based company, with operations in Newfoundland, filed a notice of intention Aug. 21 under the Bankruptcy and Insolvency Act to make a proposal to its creditors, which number in the dozens — ranging from $24.9 million owed to bank HSBC to $323.29 owed to New Brunswick company Pennfield Hydraulics — giving it 30 days to come up with a plan to pay them.
Gray Aqua has been beset by three separate cases of infectious salmon anemia (ISA) over the past 14 months, resulting in culls of more than a million fish ordered by the Canadian Food Inspection Agency — a major setback for the company, according to the head of the provincial aquaculture industry association.
“They lost three of their farm sites due to ISA, and there’s some public compensation for that, but it’s never enough to recover, or hasn’t been for them,” said Cyr Couturier, executive director of the Newfoundland Aquaculture Industry Association.
“That amount sometimes covers your operating costs. Sometimes it doesn’t. But most of the time it doesn’t, and I think in this case that’s what will happen with Gray, where some of the fish were young, and most of the production of salmon is front-loaded, so your costs are 50 or 60 per cent up front and then by the time they reach market value, then you start making money. But in the case of small fish, you lose money.”
Couturier called Gray Aqua’s troubles a “blip” when it comes to the provincial industry as a whole.
“The way we look at it, I’d say for the industry here in Newfoundland and Labrador, this is a blip in our production this year and next year in the planned production,” he said, adding he hopes the company’s restructuring is successful and Gray Aqua will continue to operate in the province.
If it can’t, said Couturier, another company would fill the void.
“What will happen is the assets will still remain here in Newfoundland and Labrador. Gray may continue to operate, depending on their restructuring plan, but the jobs will still remain here in terms of the production going forward, and we’ll continue to grow in a sustainable and responsible manner as we’ve planned.”
Last year, said Couturier, the provincial aquaculture industry produced about 18,000 tonnes of fish, with Gray Aqua contributing about 2,000 tonnes — although it would have been more had it not been required to destroy nearly half a million fish, he added.
Earlier this week, The Telegram reported Gray Aqua had been sued by a fish-feed supplier over unpaid bills totalling more than $648,000, with invoices going unpaid beginning in January, just two months after the Newfoundland and Labrador government announced a $5-million investment in Gray Aqua for expansion.
Gray Aqua has also received nearly $3 million from the federal Atlantic Canada Opportunities Agency over the last two years, and still owes the agency $2.2 million, according to the list of creditors.
Fisheries and Aquaculture Minister Derrick Dalley called it a difficult situation for Gray Aqua.
“But the industry as a whole, it’s been a very strong industry with tremendous growth opportunities,” he said.
“From our perspective, the industry is strong and the outlook is positive. It’s just a very unfortunate and difficult situation that Gray finds themselves in right now.”
Dalley said he met with representatives of the company Aug. 13.
“We’ve had some discussion about the company and some of the challenges that they were facing,” he said.
“They’d agreed then that they’d be submitting (a plan) to government for consideration.”
At the time, he said, the company didn’t indicate they’d be filing for bankruptcy protection, but department officials have met with the company again since last week’s filing.
Dalley said Gray Aqua had drawn on $3.8 million of the $5-million provincial investment announced in November — “I guess that’s all that’s going to be drawn down at this point,” he said — with the money coming from government funds specifically designated to support and attract aquaculture businesses in the province.
“We saw an opportunity where, particularly in an area of the province, the south coast, that was decimated economically through the ’90s, we saw a tremendous opportunity there to be able to attract companies,” he said.
“But in order to do so, because of the risks associated with aquaculture, the lending institutions weren’t as interested as probably companies would have liked, but with the support of government through this equity program, we’re able to attract the lending institutions to support the companies.”
About $24 million has been put into the program by the provincial government over the last several years, said Dalley, resulting in about $400 million in investment from companies.
“The $3.8 million, it’s a difficult situation, and we’d like to get the direct return on the $3.8 (million), but in terms of economic development, some 1,000 jobs have been created within the industry — it’s (an) over $100-million industry with tremendous potential, so it’s been a good investment from our perspective, but it’s just a difficult situation right now for the company, and we wait 30 days to see what the outcome will be.”
The Canadian Food Inspection Agency will not release the amount of compensation provided to Gray Aqua following the agency’s orders to destroy infected fish.
“Specific compensation amounts are not disclosed publicly as they fall under the Privacy Act,” wrote agency spokesman Rod Lister in an email to the Telegram.
“Until a final payment is awarded, the CFIA is not able to publicly discuss specific details surrounding any determination for compensation, including this one, due to privacy and confidentiality concerns.”
The amount of compensation is meant to reflect market value of the fish, up to a maximum of $30 per salmon, under federal regulations. With 450,000 fish ordered destroyed in 2012 and another 800,000 ordered culled in June, Gray Aqua could receive a maximum of $37.5 million in compensation.
Company president Tim Gray has not responded to repeated messages left requesting comment on the company’s financial troubles.
“He won’t talk to you, I can tell you right now,” said the Gray Aqua employee who answered the phone Wednesday.
“I’ll give him the message, but I can guarantee you right now he won’t call you back.”