Monday, July 05, 2021

Financial troubles hit company involved in proposed Sydney container terminal


Mon., July 5, 2021

Albert Barbusci says shipping lines should find the project more attractive, now that it has a location and funding in place. (Tom Ayers/CBC - image credit)

A venture capital company behind the proposed container terminal in Sydney, N.S., is in financial trouble, but proponents say that will not affect their investments or the project's future.

In addition to raising questions about the proposed development, the issue has provided the first real insight into the port project's financing, suggesting the estimated financial value of NovaPorte LP, the company that is trying to put together a consortium to finance and build a container terminal.

In January 2020, Bridging Finance of Toronto loaned Membertou First Nation $6.8 million to give the band a 12.5 per cent stake in NovaPorte, a limited partnership launched by Sydney Harbour Investment Partners, also known as SHIP.

The financial firm also gained a small interest in the port project, but earlier this year the Ontario Securities Commission found financial irregularities at Bridging Finance and forced it into receivership at the end of April.

Red flag

George Karaphillis, dean of Cape Breton University's Shannon School of Business, said the company's involvement in NovaPorte should now raise a red flag.

"It is obviously a concern that the venture capital firm that's backing the project is in financial difficulties and it's in receivership," he said.


Cape Breton University

It's difficult to know how it will play out, Karaphillis said, but it's possible that the receiver might need to sell the company's stake in NovaPorte or call its loan to Membertou in order to gain liquidity.

On the other hand, depending on what the receiver finds, that might not happen, he said.

The container terminal development has been talked about for a decade or more, but there has never been any public evidence that it is closer to becoming a reality.

Cape Breton Regional Municipality has set aside a piece of land for the proposed terminal across the harbour from Sydney.

The promoter says he has financing, a builder and a shipping line for a customer, but he also recently secured from CBRM a three-year extension on an exclusive contract to get the project going in earnest.

'A billion-dollar deal'

Membertou Chief Terry Paul declined an interview request, but in an email, he revealed the amount of the loan from Bridging Finance and the share that represents in NovaPorte.

"The investment we made in the project remains unaffected by the recent news of Bridging Finance's receivership," he said. "Bridging Finance was a Membertou financing partner, and not one of SHIP.

"Since the announcement of its receivership, Membertou has been working with the receiver, and our investment remains secure."

The project has been touted as a billion-dollar deal, but financial details have been murky since 2015, when SHIP first secured an exclusive contract to market CBRM's land in Sydney harbour.


CBC

SHIP principals Albert Barbusci and Barry Sheehy have said their company is private and that their information needs to remain private to avoid tipping off possible competitors.

CBRM's mayor, councillors and staff also had to sign non-disclosure agreements that they say prevented them from providing any details.

NovaPorte LP is registered in Quebec and lists four shareholders including SHIP, a numbered company solely owned by Barbusci, a numbered company registered to Membertou, and Bridging Finance.

Asked about the venture capital company and how its financial difficulties might affect the port project, Barbusci also declined interview requests.

But in an email, he said Bridging Finance was "not party to any contractual agreement with SHIP. They provided debt financing to Membertou and not to SHIP.

"Therefore, we have no exposure and zero risk to the NovaPorte development and no effect on our ability to advance the project together with our Indigenous partners."

However, when it was pointed out that Bridging Finance is also listed as a shareholder in NovaPorte, Barbusci responded with another email, saying the company's stake "is minimal."

Bridging Finance received a 2.5 per cent share through its agreement with Membertou, he said.

"It has been a passive investment since Membertou became an equity partner in NovaPorte LP," Barbusci said.

Tom Ayers/CBC

Barbusci said last fall he has the financing to build the proposed terminal, has found a builder and has a customer lined up to bring in shipping containers.

But he said Cape Breton's crumbling rail line needs to be revitalized before the container terminal deal can be finalized.

SHIP has launched an effort to press the Nova Scotia government for investment in the railway, but the province has repeatedly said private investors would have to fund the more than $100 million needed to rebuild the rail bridges and tracks.

Membertou's 12.5 per cent stake in NovaPorte at $6.8 million dollars places the value of the company at $54.4 million.

At that rate, Bridging Finance's stake is worth $1.36 million.

Karaphillis said that valuation is about right for what could be a billion-dollar container terminal.

"Big projects of that size, it is reasonable that [about] five per cent of the final project is spent in trying to get the project organized initially, in trying to get it off the ground," he said.

"Yeah, $55 million looks like it's a reasonable amount to be able to get the project to the point where it actually can get started."

Business-savvy investor

With a one-eighth stake in NovaPorte, Membertou is considered to be a major investor.

"It's not the majority investor," Karaphillis said. "I don't know who the majority investor is, but it is a major investment.

"Twelve per cent is significant. It's double digit."

Membertou is known for being a business-savvy investor, he said, but without seeing NovaPorte's financial statements or its agreements with potential partners in the container terminal project, it's impossible to know whether Membertou's investment is a good one.

"That I do not know, because none of us here have the whole picture, the whole information," Karaphillis said.

"We wouldn't know if there is a customer or any of that, but obviously for Membertou to make that investment ... they're aware of some information that gives them comfort in the fact that the project will come to fruition."

CBRM council met privately with Barbusci twice this spring and recently agreed to a three-year extension of SHIP's contract to market the port project.


Warren Gordon photo

Mayor Amanda McDougall said she did not have any concrete information on the container terminal's viability, but voted in favour of the extension because Membertou signed on as a partner and recently led a billion-dollar purchase of Nova Scotia's largest seafood company.

"We've seen what Membertou is capable of doing, in terms of the Clearwater [Seafoods] agreement," she said.

"That's billions of dollars into our fishing industry. That is the only thing that is giving me any confidence that this project is going to move forward, quite frankly."

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