Dominion heads back to court to extend creditor protection
Dominion Diamond Mines will appear in court by video link on Friday to argue for an extension of its creditor protection arrangements, documents posted online show.
Last week, Dominion was granted protection from creditors until May 2 as its inability to sell diamonds during the Covid-19 pandemic means it has no cash to pay a range of bills.
The company owns the NWT’s Ekati diamond mine and 40 percent of neighbouring Diavik. Last week, it missed a $16-million payment to Diavik. The company says it can’t meet a $28-million interest payment on other debts due on May 1.
A notice of application published on Monday states Dominion now wants the protection period extended until at least June 1.
Extension requests like this are not unusual. Companies often return to court to buy extra time for restructuring or to find new investment so they can later come out of creditor protection and pay their debts. (Creditor protection acts as a pause button, allowing companies to rearrange their finances without the immediate pressure of having to make certain overdue payments.)
The company has almost $200 million in diamonds tied up in both Canada and Belgium, where the world’s diamond trading floors are currently closed due to the pandemic.
Because pandemic restrictions mean Dominion can’t move or sell any diamonds, the company has no revenue coming in and expects to lose $39 million between now and July.
Ekati suspended operations last month and more than 400 employees were furloughed. The mine is in care-and-maintenance mode with a skeleton staff.
Dominion needs ‘reasonable time’
The application for an extension argues giving Dominion an extra month is “just, convenient, necessary, and in the best interest of the applicants and their stakeholders.”
The document states: “Given a reasonable time to advance the companies’ restructuring efforts, the applicants’ management is optimistic that the overall value of their business will likely be enhanced to the benefit of their stakeholders as compared to a forced liquidation scenario.”
Dominion’s management has insisted bankruptcy is not an immediate prospect.
The company expects its parent, The Washington Companies – which bought Dominion for $1.5 billion in 2017 – to inject some money to keep things going.
More: Inside the finances of a stricken NWT diamond company
“We have and are considering a proposal from The Washington Companies, Dominion’s current owner, to provide near-term financing,” said interim chief executive Patrick Merrin on Friday.
“This would help provide sufficient liquidity to operate the Ekati mine.
“This does not mean that Dominion is bankrupt or going out of business … to the contrary, the process we have entered allows us to pursue a controlled restructuring.”
Dominion’s operations were worth more than $500 million to northern businesses in 2018 and 2019. It had already been struggling with a weak diamond market prior to the pandemic.
On Thursday, NWT industry minister Katrina Nokleby said: “We’ve all been aware for a while that our economy was having some challenges. It hasn’t come as a shock, however, of course it’s concerning.
“We’re doing everything we can to support our resource sector so that, when we get through Covid-19, we have an industry to come back to.”
An Alberta court holds ultimate authority over whether Dominion’s extension request is granted.