Dane Gibson
Northern News Services

NNSL (May 07/99) - Royal Oak enjoyed the luxury of credit while they had it. It's obvious, because they purchased everything from pizzas and flowers to power -- based on their word.

The bills peppering the countryside are as varied as the amounts Royal Oak owes to various companies. Everything from Bruno's Deli and Pizza, who aren't holding their breath for the $14.45 Royal Oak owes them, to the Northwest Territories Power Corp., who is waiting for close to $1.6 million.

Power Corp. director of corporate development, Bill Braden, hasn't seen the recently released PricewaterhouseCoopers list of 1,400 companies and organizations, scattered across Canada, owed money by Royal Oak.

"We do not discuss customer accounts but we are still supplying power to the mine," Braden said.

"I can say that the amount of arrears (owed by Royal Oak) is not rising. The receiver is required to keep essential services going and we fall under the essential service category. As for future services, that is very much a condition of what happens with the receiver. At this point, it's all just speculation."

Yellowknife Mayor Dave Lovell is already planning for the eventuality that the city won't receive the $1.1 million Royal Oak owes them. But thankfully, Lovell said, the city had built up a surplus over the years of more than $1 million.

"The reason we keep that surplus is to handle unforseen shortfalls like we're experiencing now. Without it, this year we would have had to either cut our services from what was budgeted or increase taxes," Lovell said.

"If we didn't have that surplus to smooth things out, we'd be looking at a six to nine per cent increase in taxes to make up for the loss."

He said they are trying to collect the money but that he "can't pretend that everything is OK."

"I can't say for sure that were going to receive any of the Giant debt so the city has to plan realistically for what they know," Lovell said.

"If another company takes over, we may collect taxes in the future, but it's wishful thinking to expect that company to pay Giant's back taxes."

He also said $500,000 of that debt was earmarked for the school board. The city is the board's agent for collecting taxes.

"Next year, we'll collect more on the school boards behalf to make up for the shortfall this year," Lovell said.

The receiver's list paints a grim picture. It states that the consolidated net book value of Royal Oak was $612,200 on Dec. 31.

The unsecured creditors are owed $40.5 million. That includes local businesses such as Midnight Sun Energy, Weavor and Devore and Igloo Building Supplies, just to name a few.

Midnight Sun Energy owner Alex Hampson sold special batteries to Royal Oak on a regular basis. The small Yellowknife business is owed $14,500.

"In spite of the fact I tend to be an optimist, I'm not optimistic I'll see that money. The math just doesn't compute," owner Alex Hampson said.

"In our situation, $14,500 will affect our bottom line. I try not to be all doom and gloom, somehow the situation might turn around, but it's unlikely."

She said credit is always a balancing act between keeping customers happy in a small market and gauging the risk of lending.

"I think in any case, small businesses have to be careful how much credit they extend because the potential for bad debt is always there," Hampson said.

"If you extend $100,000 to a company, you have to be prepared to accept that as a risk no matter how well regarded they are."