Tandem Temporary Textiles: Not a winner

Tandem Textiles receives $2.43 million in corporate welfare

Instead of giving my readers the usual earful about how damaging corporate welfare deals are to our provincial treasury, economy and future prosperity, I thought I would list the three steps of corporate welfare (as they pertain to the local textile industry) using my favorite subsidy sinkhole, Atlantic Fine Yarns, as the model case for return on investment of our tax dollars allocated by Business New Brunswick:

Step 1: Corporate welfare formula is announced in a government friendly photo op to an obvious declining industry: "Byrne announced that the Government of New Brunswick will provide Tandem Textiles with a $1.43-million forgivable loan and a $1-million term loan to assist with capital costs and facility upgrades, and the expenditures required to upgrade environmental and water recycling equipment."

Step 2: Market dictates otherwise and the end result [again] is that bureaucrats and politicians are terrible at picking winners or knowing business (better at picking losers): "Two textile companies in northern New Brunswick have filed for protection from their creditors and are one step closer to bankruptcy. Representatives from sister companies Atlantic Yarns and Atlantic Fine Yarns and a trustee met with the company's union Monday to talk about the future. About 365 employees work at the two textile mills in Atholville and Pokemouche." (Oh btw, they have cost NB taxpayers well over $41,583,800 in loans, interest and loan guarantees. The reason I reference "well over" is because corporate welfare not only creates an unfair business environment, it diverts capital from successful companies/firms, who don't receive government assistance, to their subsidized competitors via high small biz taxes & corporate taxes. So these loans indirectly punish other companies as well)

Step 3: Costly legal ramifications ensue when discussions and negotiations take precedent (between the debtor and their creditors) over the avoidance of bankruptsy (plan of arrangement): "The Monitor has prepared and filed with the Court a report on the Creditor meetings, which report is the fifth report of the Monitor set out below under Reports of the Monitor. At the Unsecured Creditor Meeting held on April 2, 2008, the unsecured creditors approved the plan as amended. The creditors were well represented and the plan has overwhelming support of the creditors. A copy of the minutes is attached under Court Documents. At the Secured Creditor Meeting held on April 2, 2008 the secured creditors approved the plan as amended. A copy of the minutes is attached under Court Documents. At the April 11, 2008 Court hearing by agreement between the parties the matter was adjourned until May 27, 2008. A copy of the Court Order is enclosed below under Court Orders. At this date, the Order from the April 1, 2008 hearing has not been received from the Court and will be posted when received. The Government of Canada has not yet passed or proclaimed the legislation related to the Outward Processing Initiative, which is still pending. The plant will remain closed for the next few weeks until this is proclaimed. The Companies continue to work with their secured creditors to finalize the terms and conditions of future involvement. GE remains the only secured creditor in opposition to the Plan. The Companies continue to seek additional financial resources for the Companies for working capital purposes." (See also here, here and here)

So file me under "skeptical" for this most recent corporate welfare arrangement between Business New Brunswick and Tandem Textiles. just me. H/T: Gypsy Blog.

Related posts -- a growing list of offenses by the Graham government

Guest commentary on Prudential deal (Prudential consulting)
Royal Oaks gets $5 million government mulligan (Royal Oaks Estates and Golf Club)
Is ACOA damaging to our local business climate? (ACOA subsidies)
End Corporate welfare now (Atcon Group Inc.)
Should taxpayers be funding known polluters? (AV Cell Inc.)
When in doubt? Give out a forgivable loan (Prudential consulting)
Corporate welfare not the answer (AV Cell Inc.)
I can't drive 55 (Roger Duguay on grants & loans)
Corporate welfare on the march once again (Atcon Group Inc.)
Spinning Yarn of Corporate Welfare (Atlantic Yarns)
Atlantic Yarns: Bottomless subsidy pit (Atlantic Yarns)
Atlantic Yarns: bottomless-pit filing for bankruptcy? (Atlantic Yarns)
The business of gov't is not the government of business
A culture of dependency (Rogers Communications Inc.)
My New Business Plan (The Mactaquac marina)
Business Pork (Cape Jourimain Nature Centre Inc.)
Statist Guile (Premier's pledge to stop use of grants & loans)
Put An End to Wasteful Subsidies (Atlantic Beef Products Inc.)