Taiga safe from its creditors | Millions loaned by Quebec and Ottawa at risk

After issuing numerous warnings, Taiga made a decision that seemed inevitable: to protect itself from its creditors. Tens of millions loaned by Quebec and Ottawa to the Quebec manufacturer of electric snowmobiles and watercraft are at stake.

Under the protection of the Companies’ Creditors Arrangement Act (CCAA), the young Quebec company will try to attract investors or buyers for its assets. This process is supervised by Deloitte, which acts as monitor.

“There was no profitability on the horizon and no light at the end of the tunnel,” says Raphaël Duguay, professor of accounting at Yale University. “The decision was very predictable.”

Considered one of the rising stars of electrification before its financial troubles, Taiga did not respond to a request to speak with its co-founder and CEO Samuel Bruneau on Wednesday.

With its coffers dwindling and revenues insufficient to replenish them, the company warned investors last April that there was “significant uncertainty” about its future.

This announcement was accompanied by a production shutdown at its plant located in the Montreal borough of LaSalle. As of March 31 – the most recent public data available – there was only $2.5 million left in Taiga’s coffers.

Its receivables total $93 million, according to the report written by restructuring specialists at Deloitte, Benoit Clouâtre and Jean-François Nadon. Last May, the firm had approached no fewer than 57 potential buyers or investors, without success.

“Although the process generated interest, given the financial situation of the company, no offer could be accepted outside of a formal insolvency procedure,” it reads.

Deloitte will again contact parties that have shown interest in Taiga, the report notes. The firm also plans to solicit entities that could be interested in certain assets of the Quebec manufacturer, which could result in a dismantling.

Federal buoy

To hold out while it looks for an investor or buyer, Taiga has convinced Export Development Canada (EDC), its main secured creditor, to lend it up to $4.4 million more. The federal Crown corporation has already offered the company nearly $20 million in loans.

Taiga had also borrowed $18.3 million, in the form of debentures, from Investissement Québec (IQ), the financial arm of the Quebec government, last year.

So there is more than 40 million in public money due to the Taiga collapse. The chances are slim that the two levels of government will be able to see the colour of their money again, estimates Mr. Duguay.

“For Quebec, it could be a few cents for every dollar,” he said. “At the federal level, debts are partially guaranteed. It will probably be a little more, but a fraction for every dollar lent.”

One thing is certain: we should not expect to see the Legault government rush to Taiga’s rescue. In a recent telephone interview, the Minister of Economy and Innovation, Pierre Fitzgibbon, had ruled out this scenario.

“If there are strategic partners who want to invest, we could be interested,” Mr Fitzgibbon said. “But we can’t be the lead financier of the rescue.”

The Quebec manufacturer had obtained, in the summer of 2021, loans of up to $40 million from Quebec and Ottawa for the construction of a factory in Shawinigan, in Mauricie. This project will not see the light of day and the governments have not spent any money on this file.

After a promising start on the Toronto Stock Exchange, where the stock was trading at just over $13, Taiga’s stock has steadily lost ground as the young company struggled to increase its production rate and find new sources of financing.

On Bay Street, the stock has tumbled to 30 cents, giving Taiga a market value of about $10 million. The stock is at risk of being delisted, the company warns.