Nunavut lender cites slowing economy for deficit, struggling clients
Nine of 44 NBCC loan clients struggle with loan repayments
The Nunavut Business Credit Corp. blames the slowing economy for its reported decrease in performing clients this year, coupled with a deficit of nearly a million dollars caused in part by preparations for a rainy day.
The NBCC says nine of its 44 clients are failing to make good on their loan agreements, which contributed to the corporation setting aside $1.22 million in loan provisions that dragged its tallies into a year-end deficit of $973,829.
A loan provision is an amount set aside as security in case a loan defaults.
In total, those failing clients represent approximately $3.3 million in public funding.
That’s according to the NBCC’s 2015-16 annual report, tabled in Nunavut’s legislature on the last day of its fall sitting, Nov. 8.
“The corporation has concerns about the continued viability of some of its clients and will be carefully monitoring the financial performance of these clients in 2016-17,” the report stated.
The NBCC’s current report is the first submitted by the corporation to include more in-depth reporting of its lending portfolio, following recommendations by Nunavut’s Standing Committee on Oversight of Government Operations and Public Accounts demanding more transparency.
But the NBCC did not include the names of its clients, as was requested by the standing committee and confirmed to be legal by Nunavut’s privacy commissioner on multiple occasions—in part because all applicants to the NBCC sign a public disclosure form.
Nevertheless, the report provides additional information regarding the nature of its investments, including running tallies on industry and community.
Iqaluit receives nearly half of all loans granted by the NBCC at an estimated 49.9 per cent of its 2015-16 portfolio, down slightly from 51.2 per cent from the previous year.
Nunavut’s two regional hubs, Rankin Inlet and Cambridge Bay, received the second and third greatest amounts of funding, at 12.3 per cent and 7.3 per cent respectively.
Construction was the industry that received the highest amount of public lending, accounting for $4.3 million out of the corporation’s $21 million dollar portfolio or roughly one fifth.
Retail and services industries were next, each receiving more than $3 million in funding.
And while the NBCC did not provide a complete list of its clients as requested, it did include three names of clients within the page-breaks of its report—but did not specify exactly what the loans were for or how much was given.
Those companies include the Arctic Fisheries Alliance,and developers Polar Builders and Nunavut Construction Ltd.
A response to the standing committee by Nunavut’s department of Economic Development and Transportation, tabled in March, suggested that the NBCC is willing to release additional information on clients in future annual reports.
The chief executive officer for the NBCC, Peter Ma, said some clients are suffering challenges due to the “general state of the economy” while noting other clients have done better this year, resulting in credit increases.
Overall, the report says all eight credit applications received during 2015-16, all for more than $500,000, were approved for an amount totalling $7.18 million.
NBCC directors also approved all five credit applications received this year—equal to or less than $500,000—for a total of $1.4 million.
The NBCC report stated that the lending agency has renewed its “memoranda of understanding,” or MOUs, with other lending agencies, such as the Atuqtuarvik Corp., the Baffin Business Development Corp. and the Kitikmeot Community Futures Inc.
Those MOUs were tabled by EDT minister Monica Ell-Kanayuk earlier in the legislature’s fall sitting, as requested by the standing committee.
All MOUs agree to share client and lending information, in varying capacities, between the agencies.
That information exchange between agencies was used in EDT’s response to the standing committee to account for the “pubic disclosure” sections of the NBCC client application form.
In April, Rankin Inlet taxi operator, David Wiseman, was declared bankrupt following a civil suit by the NBCC seeking repayment of $1.1 million in defaulted loans.
Wiseman also failed to pay back at least $100,000 in loans from the regional development agency—Kivalliq Business Development Centre—for similar loans to his taxi business.
Wiseman is currently facing two criminal charges of fraud in Nunavut’s Court of Justice, stemming from more than $300,000 in alleged falsified invoices to his insurance company.