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UPDATE: Timminco owes Quebec’s investment arm $26M+

The Quebec government’s investment agency is owed more than $26 million by Timminco Ltd., a specialty metals producer that filed for court protection this week.


January 5, 2012
by CANADIAN PRESS

TORONTO: The Quebec government’s investment agency is owed more than $26 million by Timminco Ltd., a specialty metals producer that filed for court protection this week.

In total, the Toronto-based silicon metals company owes $89 million to its various creditors and has run out of sources of funding to keep its operations running, according to court documents made public Jan. 4.

Timminco files for bankruptcy restructuring

The company owed $21.9 million in employee benefits, including $4.3 million for termination to former employees and certain former officers. It also owes various amounts to pension plans for its Ontario and Quebec employees.

The documents reveal that Investissement Quebec provided a $25-million loan to Timminco in July 2009 and agreed the following March to add $1.4 million of interest owing to the principal.

The loan, which currently racks up interest at a rate of 12% per year, is guaranteed by Timminco and secured by all of the assets of its Becancour Silicon Inc. including its ownership share of Quebec Silicon Limited Partnership.

Timminco was a stock-market darling several years ago, based on a proprietary process for making solar grade silicon.

Demand for the material virtually dried up several years ago in the wake of the 2008 credit crisis but even before that there were persistent questions about the true value of the process.

Besides solar grade silicon, used for turning the sun’s energy into electricity, Timminco produces silicon metal through the Quebec Silicon joint venture, which is 51% owned by Dow Corning and 49% by Timminco unit Becancour Silicon.

Quebec Silicon Limited Partnership itself isn’t part of the CCAA filing.
The Ontario Superior Court of Justice has granted the company protection from its creditors until Feb. 2, to give Timminco time to come up with a survival plan satisfactory to its creditors.

By the end of January, a seasonally slow month for the company, Timminco will be down to about $500,000 of cash, according to a cash-flow forecast included with the company’s court filing.

The company noted that Investissement Quebec has been helpful in the past but hasn’t stepped forward to deal with the current cash crunch.

“The Timminco Entities sought further relief from IQ beginning in September 2011; however, further relief has not been forthcoming,’’ the filing said.

It also said its largest shareholder, AMG Advanced Metallurgical Group NV, is unwilling to provide more money to Timminco without the provincial agency’s further participation.

AMG, which owns 42% of Timminco’s shares and is the company’s main customer, has provided a US$5-million loan that charges annual interest of 14%.

In the wake of the bankruptcy filing under the federal Companies’ Creditors Arrangement Act, the Toronto Stock Exchange suspended the company from trading and said it is reviewing Timminco to see if it should be delisted.

Timminco and other companies in the solar technology industry are under pressure as cash-strapped governments scale back subsidies to the industry, other financing sources dry up and Chinese competition intensifies.

Under the CCAA process, FTI Consulting Canada Inc. has been appointed as the court-appointed monitor of the company’s business.

Timminco produces silicon metal for the chemical silicones, aluminum and electronics solar industries, through its venture with Dow Corning. It’s also a producer of solar-grade silicon for the solar photovoltaic energy industry, through its subsidiary Becancour Silicon.

In its third quarter, Timminco reported a consolidated net loss of $2.4 million, well below the $34 million loss in the same quarter a year ago.

Quarterly sales fell to $28.6 million from $36.9 million in the third quarter of 2010.

© 2012 The Canadian Press