Minister says loan to private company in good standing

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

Published on March 19, 2016

The P.E.I. legislature has been moved to the Coles Building while renovations are underway at Province House.

©Heather Taweel/Guardian photo

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.”