Temporary layoffs at Davie YardsYard News // December 15, 2008
Despite a recent refinancing plan, Davie Yards in Canada has announced temporary layoffs for 1,100 shipyard employees at its facility in Lévis, continuing until mid-January, 2009, subject to completing further key steps of its refinancing plan.
The company said the decision was taken with a view to preserving limited cash reserves in order to allow time and the necessary resources for the completion of the refinancing plan announced in late August of this year.
Davie’s cash position has been negatively impacted by its clients’ inability to make their installments under their contracts without having refund guarantees in place.
Steinar Kulen, Davie’s Chief Executive Officer, explained that all efforts were being pursued in a very difficult financial market environment to complete the refinancing plan and to thus ensure the restart of Davie operations shortly.
In August 2008, Davie developed an operational improvement plan, which is currently under implementation, as well as a US$90 million financial restructuring plan.
The US$90 million financial restructuring plan consists of price increases of US$60 million with existing clients, which have been agreed to in principle, subject to certain conditions, including that Davie obtain refund guarantees, as well as a debt and equity injection of US$30 million, of which US$12.7 million has been obtained in loans from Investissement Québec, and a US$10 million intention from the Bergen Group of Norway.
All of these elements of the plan are conditional on Davie obtaining refund guarantees in favour of its clients to support their financing of the US$700 million of contracted vessels currently under construction and Davie obtaining short-term funding.
Davie is pursuing discussions with Export Development Canada, which has been cooperative and is confident that the necessary financing support can be obtained shortly.
Mr Kulen added: "“Davie can be very competitive for the construction of complex vessels, and the proposed partnership announced this week with the Bergen Group will further enhance our capabilities and competitiveness, thus assuring a promising future for the Davie shipyard."
“We appreciate the valuable support of our stakeholders to help us work through this current liquidity problem,” added the Davie CEO, who continued, “we offer our sincere thanks to our employees, our suppliers, regional partners, as well as the governments, which are working closely with us.”