Minister says loan to private company in good standing

Teresa Wright, The Guardian
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The P.E.I. legislature in the Coles Building.

Auditor General Jane MacAdam raised a number of concerns in her report

A government loan of over $30 million to a private company flagged as a financial risk by the auditor general is in good standing, says Economic Development Minister Heath MacDonald.

Auditor General Jane MacAdam raised a number of concerns about how a loan first issued to Dyne Holdings in 2008 was handled by Island Investment Development Inc. (IIDI) and by executive council.

The loan, which was for three projects including the Holman Grand Hotel in Charlottetown, was refinanced and increased twice, topping out at $38.6 million in 2014 despite numerous red flags raised by IIDI.

A total of $35.5 million remains outstanding as of March 31, 2015, but Auditor General Jane MacAdam has since written down the amount the province expects to be repaid on this loan by $10.6 million.

However, MacDonald says Island taxpayers need not be concerned.

“At the present time the loan is in good standing,” he said.

“We have great security on the loan at about almost $39 million on five downtown buildings and two in Nova Scotia, so I think as taxpayers we’re sitting in a pretty good spot right now.”

MacDonald explained that a write-down of a loan does not mean it is written off and that the full amount could still be recovered.

“It’s a loan loss provision. It’s just basically on the balance sheet,” he said.

In her 2016 annual report, the auditor general flagged the Dyne Holdings loan as a “significant risk to the province” and raised concern about the due diligence on the approvals it received.

Cabinet approved the loan and the two refinancing deals on it in spite of concerns raised by IIDI.

MacDonald says the economy and climate of the day should be kept in mind when looking at this deal.

When asked if a similar loan proposal would be approved today if it were forwarded to cabinet, MacDonald was indecisive.

“If you go back to 2008, everything has changed, governments have changed, policies have changed, accountability has changed, transparency has changed. We’re moving forward, and I don’t think going back eight years – I can’t base a decision on 2008. I can only base a decision on 2016.”

Opposition MLA Matthew MacKay says he was “amazed” this loan was approved in spite of concerns raised by IIDI, as detailed in the auditor general report.

He said he is concerned about the status of this loan.

“Not only this one, this one is huge, but just the practices in general. When you’ve got cabinet ministers approving loans with no collateral – this is taxpayers’ money,” MacKay said.

“It’s making sense now why the province is in the financial state it’s in, it’s from bad decisions like this.”

Green Leader Peter Bevan-Baker said he wasn’t surprised by the concerns raised by the AG about the Homburg loan, considering the well-documented troubles within the Homburg companies and the closure and eventual re-opening of the Holman Grand Hotel in 2012 and 2013.

“Islanders want to know their money is being spent carefully and wisely, and the AG makes perfectly clear there was very little monitoring,” Bevan-Baker said.

“One thing that has to be done is to look at the role of IIDI, the role of the IIDI board and make them accountable… there’s no accountability at the moment at all. It’s almost as if the fifth floor was using IIDI as their personal bank and that’s no way to administer public funds.”

Organizations: Island Investment Development, Dyne Holdings, Holman Grand Hotel IIDI board

Geographic location: Charlottetown, Nova Scotia

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Recent comments

  • SlyFox
    March 20, 2016 - 09:04

    Shame on politicians for doing this to the taxpayers and shame on the taxpayers for letting the politicians do it to them.

  • Big Jack
    March 20, 2016 - 08:32

    We've heard this before from Ghiz, Sheridan, Roach, MacLauchlan and now, MacDonald. Nobody believes you, Mr. MacDonald, so take your nonsense someplace else. This thing about the "loan being in good standing" is an all too common theme in PEI. WHY is the provincial government continuing on this path to bankruptcy by handing out loans to businesses? Let them go to a chartered bank and get a loan like everyone else. Oh, but they would be required to pay the loan back...right? This foolish disregard for the public purse needs to stop. This government continues to raise taxes to pay for all these loans which, in most cases, turn into grants with the stroke of a pen. Islanders are sick and tired of it.

  • don
    March 20, 2016 - 07:29

    well you voted them in. so why are you whining? you knew ghiz boys are still in control and it looks like wade is the leader but does as he is told. if he was the real leader he would not allow u to lose millions..

  • Kevin
    March 19, 2016 - 23:06

    Where is the press on this one or is this like the PNP. This Holman deal stinks through and through and no one has the guts to push it Why?

    • james
      March 20, 2016 - 08:48

      They are busy covering the big panhandling scandal

  • Laurent Beaulieu
    March 19, 2016 - 19:08

    All the auditor did was point out some concerns. However there is no need to panic and the loan is secured with real estate in the core of the Capital. Many commenters appear not to have read the report from the auditor and simply shoot from the hip without understanding accounting or how loans work. Comparison with past problems in another era on other projects is inappropriate.

  • Alfred
    March 19, 2016 - 14:23

    An other of Ghiz/Roach sick legacies. Why is that man still in government?? Finance Minister no less, after screwing around with loans procedures and what ever else, that ever else we don't know of yet.?

  • Laurence
    March 19, 2016 - 14:18

    If the loan is in such a great shape, why was it written down by $ 10 mill. That is just a signal to the borrower, that it is not expected they will ever pay that portion back. MacDonald is putting on a brave face, but the truth is that this can crash any time. There should be a Royal Commission looking into the dealing that was done during the Ghiz years, partly so the taxpayers can know and partly so it can be avoid an other time.

  • Chester H llewellyn
    March 19, 2016 - 13:44

    Give the file to the Deputy Premier of PEI he is the shadow man....smoke and mirrors pro.......he knows how to " erase with a pen, blotter, I pod, dish cloth, no flies.....write it off....and then you will save paying Lawyfees.....that is the proper thing to do.......lots of experience in doing this......oh well soon be pension time, that should bring a smile......Mr Eraser......all the way to the Bank and Taxpayer...with Wade's approval or not, would it care.....not on your news......what will be the price of Turnips come this season.......that will be good coverage.....sickening day by day......Chester L......

  • Joe Doe
    March 19, 2016 - 13:03


    March 19, 2016 - 12:54

    It’s a loan loss provision. It’s just basically on the balance sheet,” he said.(Heath MacDonald). Mr MacDonald I suggest that you had better take Accounting 101. It is not just basically a balance sheet item. One side is a reduction of the asset (loan) on the balance sheet while the other side of the entry is shown on the INCOME STATEMENT as an expense as a provision for bad debts, otherwise known as Allowance for Doubtful Accounts. If you don't know that, you shouldn't be contradicting the AG, who is a qualified Chartered Accountant.

  • Batman 007
    March 19, 2016 - 12:35

    So is Heath MacDonald saying the Auditor General is incompetent at her job? Should we start examining her qualifications as well as a possible replacement?

  • Follower
    March 19, 2016 - 09:05

    Minister Heath MAcDonald, first time I heard of you and what this story is telling us you know about as much as the bunch that caused this mess. The Auditor General has flagged this project and thats spells volumes of her intigrity. I would suggest Mr MacDonald you disclose all the facts to the penny and who was involved with this including all lawyers. This has been a flawed agreement since it started and our tax dollars wasted keepsd going higher each time this agreement/loan is mentioned.

  • Regular Joe
    Regular Joe
    March 19, 2016 - 08:25

    Oh it's in good standing that 's nice to know . Is this loan in good standing like the E-Gaming loan was . How would we know , seeing as Goverment likes to keep everything hid from us and feed us half truths and Huge amounts of BS .

  • Jim
    March 19, 2016 - 08:07

    Where is there no reason for concern ? The province as already lost 10.6 million! Nothing left to do but name a street for them .

  • don
    March 19, 2016 - 08:02

    well minister are you willing to put that on paper that if the loan goes bad that you personally will pay it? put up or get out. you sound like the past ghiz gang all talk no action so show the tax payers you mean what you say..............