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Clearwater Seafoods Income Fund is turning to two federal corporations and the Nova Scotia government for a crucial first phase in refinancing its debt, with the firm's chief executive officer saying private Canadian banks simply aren't willing to lend it money.

Of the $57-million being lent, $15-million will come from Clearwater's home province through the Nova Scotia Industrial Expansion Fund, while two federal Crown corporations, the Business Development Bank of Canada and Export Development Corp., will provide a total of $27-million.

Colin MacDonald, the chairman and CEO of Clearwater, said in an interview that the decision to seek finance from the public lenders was due to a collapse in interest from traditional bank partners.

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After the market meltdown last fall, "the ability to borrow money...was truncated severely," Mr. MacDonald said.

"There is a reluctance of parties to lend. Traditional banks are just not out there any more. They're risk-averse at best."

Established companies that have huge fishing licences, established export markets and profits often aren't able to obtain loans, Mr. MacDonald said.

"In their desire to be risk-averse, they've forgotten who their customers are, and they're relying on service charges to generate profitability".

The agreement with the three government agencies is part of a larger restructuring of $95-million of debt that comes due on June 8.

GE Capital Market will chip in a further $15-million for the three-year term loan. GE is also working to assemble another agreement to refinance the other $38-million that comes due next week.

Clearwater says it's confident it will be able to finalize the refinancing before the deadline, and Mr. MacDonald said he'll likely be turning to a purely private consortium for the remaining cash.

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The Nova Scotia business operator, who founded the firm with entrepreneur and co-owner John Risley, said the heavily indebted provincial government - which owes $12.3-billion - shouldn't worry about being paid back by his firm.

He said the seafood company has provided security in the form of offshore fishing licences worth about $400-million.

Meanwhile, the federal agencies and GE are secured against the fishing vessels and the plants.

"It's not a high-risk investment by any of these groups, but it certainly is timely for us," Mr. MacDonald said.

The annual rate of interest is about 8 per cent over the three-year term, said Mr. MacDonald.

"We'll pay them back in three years and move on," he said.

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In mid May, Clearwater announced its first-quarter sales were up 24 per cent year-over-year to $71-million, driven by a weak dollar and higher selling prices for scallop and clams.

Before the announcement, some analysts had been expressing concern about long-term debt levels.

"This is a major concern and we had expected more progress toward resolving this issue with first quarter results," wrote Halifax-based Beacon Securities in a May 19 research report.

"Time is in short supply and Clearwater is not in a good bargaining position".

Asked whether Monday's announcement will help quell such worries, Mr. MacDonald responded: "Certainly it will. Rumour, chatter, noise is something you have to put up with because speculation runs rampant between results."

Finding fresh lenders also renews hope for Mr. MacDonald that previous plans to take the company private may be reconsidered.

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Last October, Clearwater was within days of closing a deal to privatize the minority shareholders of its income trust when minority backer Glitnir bank of Iceland went into receivership, and a stock market collapse ended hopes of finding a replacement.

"The participants are still interested in doing the deal, the partner we picked in Japan was interested, but in the moment we're focused on shoring up the balance sheet and focusing on operations," said the CEO.

"We're not in a rush to [go private] We'll put the year under our belt and look forward from there".

Michael Mills, a research analyst at Beacon Securities, said in an interview that some of the banks' reluctance is understandable, given the unpredictable nature of the fishing industry.

He notes the company has $240-million in long-term debt, and he considers that "high" for a firm with annual revenue of about $306-million.

"There is a business to be banked, but at the same time over the last three or four years there's been a number of negative factors, including fuel prices, exchange rates and one-off events like sinking ships," Mr. Mills said.

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He said he believes the management of the company has come to the realization it has to reduce its debt, and that will remain Clearwater's focus over the next year.

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