Norgate Metals, a Québec-based company specializing in the engineering, manufacturing and installation of steel-based metal products, has received court protection under the Companies’ Creditors Arrangement Act to continue operations and develop a restructuring plan.
In its report to the court as proposed monitor of the CCAA proceedings, Ernst & Young noted that Norgate operates in an industry that has been severely buffeted by recent economic and financial crises. In addition, a series of reflationary and protectionist measures introduced in the United States have created greater uncertainty for companies operating in its sector.
Norgate has also been adversely impacted by fluctuations in currency rates and steel prices. Although it operates two plants in the Beauce region of Québec, the company’s operations are primarily oriented towards the US market, with approximately 90% of its revenues generated in the New England region.
The E&Y report said that Norgate’s liquidity crisis occurred because, in order to make efficient use of its production capacity and maintain employment, the company moved into unfamiliar business sectors. It also undertook projects for which the full costs of fulfillment had been under evaluated. These miscalculations led to substantial losses.
In its submission to the court, Norgate said that although its cash receipts and current sources of borrowing are not sufficient to meet its immediate cash needs, the company is a viable business and can achieve a successful restructuring in spite of its current liquidity crisis.
Under the protection of the CCAA, Norgate intends to downsize its production capacity and seek out fewer, more profitable, and better secured contracts. It also intends to restrict its activities to the New England market in which it has historically been profitable. The company plans to dispose of its St. George plant and restructure its secured indebtedness.
A major creditor is willing to provide additional financing and a new credit facility to maintain normal operations during the restructuring process.
Judge Normand Gosselin of the Commercial Division of Québec Superior Court has issued an order staying any proceedings against Norgate until December 23, 2011. Luc Poulin of Ernst & Young will serve as the monitor’s representative for the CCAA proceedings.
