Quebec investing $188M into struggling Davie shipyard

Quebec Finance Minister CarlosLeitoannounced today that the province will inject $188 million intoChantierDavie Canada Inc., the country's largest shipbuilding firm.

TheInvestissementQubecfundswill be used refinance the conversion of the MVAsterix, a container ship that Davie transformed into a supply ship.

Though still owned by Davie, the vesselis now being leased by the Royal Canadian Navy.

The moneyis part of a larger, $488-million investment into the shipyard,which sits across the river from Quebec City inLvis.The other $300 million is coming as a loan from a private banking consortium, led by JP Morgan and Anchorage Capital.

In a statement Friday, Leito said Quebec's participation in the project would allow Davie "to make bids on other projects, so it can continue to operate."

The money is an investment, not a subsidy, the minister said, and it will be coming out of the province's $250-millionmaritime strategy fund, which was announced as part of the Liberal government's Marchbudget.

Asterixbrings supplies to navy warships at sea

Frdrik Boisvert, Davie'svice president for public affairs, said in an interview that the refinancing helped shave some of the costs off the Asterix conversion project.

Boisvertsaid the investment will give the firm the money it needs to update its facilities, as well as a cash flow to fund future projects.

Davie leased theAsterixto the navy for five years, with a five-year renewal option.

The vessel supplies navy warships atsea with fuel, water and food, among other things. It can also act as a hospital ship to respond to humanitarian disasters.

With its investment, Quebec will hold a 30 per cent interest in the project.

"This is a win-win transaction for Davie and the government of Qubec," said Spencer Fraser, the CEO of Federal Fleet Services, a division of Davie which managed the conversion project.

"It frees up some of the cash which was invested into building the ship and will be exclusively reinvested in the shipyard," Fraser said in a statement.

The Investissement Qubec money "will be fully repaid," he added.

Icebreakers coming in August

The shipyard is also expected to receive the first of three commercial icebreakers it is converting for the Canadian Coast Guard at the beginning of August.

Its delivery of two new ferries for theTadoussacBaie-Ste-Catherinelink of Highway 138 is also expected to take place between now and September.

Still, there have been about1,000 layoffs at the shipyard over the last year due to a lack of federal contracts.

Davie had been expecting to ink a deal with the Canadian government to build a second supply ship, known as the Obelix, but Ottawa closed the door on that project in December.

In the meantime, Davie is being sued in Federal Court for $2.65 million by Navtech, a Quebec City engineering firm which alleges it is owed royalties for design work on the Asterix.

The shipyard is contesting the lawsuit, and Boisvert would not comment because the case is before the court.