The insolvency of one of Canada’s largest and oldest contracting firms is having a ripple effect on companies in Sudbury and across Northern Ontario.
The Comstock Group of Burlington is under bankruptcy protection and a number of Sudbury-area industrial suppliers, engineering firms, equipment rental and fabrication shops, which worked as service firms on projects in Sudbury and across Canada, have been hit particularly hard.
Forty-two Sudbury-area companies showed up on a list of unsecured creditors owed greater than $1,000. Collectively, they're owed more than $2.9 million in total, with some individual companies six figures in the red.
Across Northern Ontario, 27 companies from Thunder Bay, Timmins, North Bay, Sturgeon Falls, Callander, Earlton and Kapuskasing are out more than $580,000 in total.
The company owes almost $76 million to creditor companies and tradespeople across Canada.
“It’s gonna really hurt us,” said Aki Tarvudd, owner of Laari Construction in Lively, a suburb of Sudbury.
The company was a subcontractor to Comstock and is out $261,594 for concrete work and labour supplied on steel structures at Vale in Sudbury.
“It's a big hit...right off the bottom line. We've ended up with one of our worst years right now and we're just trying to survive here.
“Nothing has been coming out of Vale right now so we’re just kind of scrambling to find more work.”
Tarvudd hasn't made contact with Comstock or PricewaterhouseCoopers (PWC), the court-appointed monitor.
“I sent it all to my lawyer. I’m not even sure where to turn here.”
Comstock Canada filed for and received CCAA (Companies' Creditors Arrangement Act) protection from the Ontario Superior Court on July 9 to give the company time to restructure.
The company was granted 30-days protection, called a stay, until August 8 to allow the company to come up with a plan of arrangement to deal with its creditors.
That stay was extended until Dec. 17 and PWC has been given authorization to begin shopping the company to attract investors or receive bids for a sale of the business and assets.
The bid deadline is Sept. 27. A teaser ad prepared by PWC said Comstock has 50 contracts on the go that could generate more than $36 million in cash flow.
Representatives at PricewaterhouseCoopers were not made available for comment.
Comstock is a 109-year-old privately-held company with regional offices in Sudbury, Thunder Bay, Winnipeg, Calgary, Edmonton and Kitimat, B.C. ith 80 staff, it employs more than 1,000 unionized and non-unionized tradespeople across Canada.
The company works at large-scale, mega-million-dollar industrial, commercial, institutional and energy projects such as airport terminals, plant upgrades, auto assembly line retooling, power transmission lines and nuclear generation unit restarts.
As the restructuring proceeds, Comstock is permitted to keep working at Rio Tinto Alcan's modernization project in Kitimat, considered a major client, to avoid project disruptions.
A Sudbury steel fabricator, Steel 2000, is owed more than $910,000 from labour and material supplied to a Fort McMurray oil patch project. The 20-employee firm slapped a lien of $854,173 against Comstock at an Enbridge Pipelines project in Alberta.
Co-owner Rick Bellrose couldn't comment on the matter when contacted in early August.
“We've taken legal action and we're awaiting some form of settlement.”
He expressed confidence his company could recover all the money owed. “If the lawyers are smart enough there’s a good possibility we will.”
Gerri Shea, an estimator with Semple-Gooder Northern, a Sudbury industrial roofing company, didn't appreciate being misled by Comstock's Sudbury manager.
His company, which is out $276,796, worked under Comstock in roofing a conveyor building at Vale's Clarabelle Mill last fall.
Shea said it's been impossible to reach anyone with Comstock but claims he has documented proof that Comstock was paid by Vale.
“He (Sudbury regional manager) gave us a line for three months and we went to their office in southern Ontario, nothing, and then we got papers from Vale saying they were paid.
“They lied to us and told us they never got paid from Vale but we found out they did...But (Comstock) is still working out west.”
“They gave us a big snow job and we missed our lien period and once you miss that, you're pretty well done.”
The impact on the company, which employs 30 during peak period, could be devastating.
“It could damn near close us down. We’re the Northern division, we stand on our own, away from the parent (company in Toronto). That’s a huge loss for us.”
Though he's not confident they will recover any money, Shea said there's a new policy in place on clients that won't pay.
“We’ll lien the f--- out of you. Anybody in Sudbury, whatever. We’re not happy, I was pissed off.”
One Sudbury equipment supplier, who asked not to be identified, considered it the price of doing business.
“It always happens. With us it’s a yearly occurrence with somebody. It’s not like it’s the first time it happened. You may end up getting some of your money; you may end up getting nothing.”
His company was owed more than $40,000, but he was prepared to wait to hear from the monitor before considering his options.
In Sudbury, Comstock has worked on the second phase of construction at Health Sciences North and below at the Sudbury Neutrino Observatory at Vale's Creighton Mine.
Comstock had been working on Vale's Clean AER (Atmospheric Emissions Reduction) project at its Copper Cliff Smelter among other work for the mining giant.
In a prepared statement, Dick DeStefano, executive director of the Sudbury Area Mining Supply and Service Association, said in tight market conditions, service companies need to be vigilant in their dealings with general contractors by “clearly outlining” payment schedules in their contract.
“If the signed agreement with a general contractor does not meet payment dates as scheduled, subcontractors should cease all services until they are paid for the services.”
DeStefano suggests negotiating a prepayment of 25-30 per cent as a protection followed by performance payments on a set schedule. Any delays could indicate financial trouble that could end in receivership or bankruptcy.
“Finally, there is always an assumed risk in any business transaction but being diligent and monitoring your cash flow and payment schedule with the courage to cease services when payments are later than 10 days is the responsibility of the subcontractor.”
By Ian Ross