The following is a short history of the events surrounding
the demise of Tanzer Industries and was originally posted on the Tanzer Mail List discussion group. It is based on an article which appeared in the business section of the Ottawa Citizen newspaper about efforts to reform Canada's Bankruptcy Act. In doing so, the article also gave a detailed account of the death of Tanzer
Industries at the hands of the Royal Bank (Canada's largest bank).
Unfortunately, the newspaper clipping wasn't dated, but it likely appeared in the spring of 1987.
According to the article, Tanzer Industries appeared to be on "a roll" during the previous May (probably the May of 1986). It had recently spent $400,000 for a French design and tooling for its new 25 foot and 29 foot models. The new boats were reported to be a major success. Sales jumped 86 % and Tanzer had $3 million worth of orders (with deposits) waiting to be filled.
On May 15, the Royal Bank told Tanzer it was concerned with the general slump in the sailboat industry. The month before, C&C had gone into receivership (a company which was also financed by the Royal Bank).
The Royal Bank insisted that Tanzer hire a particular financial consulting firm to assess the company's operations. At the time, Tanzer had overdrawn its half million dollar line of credit by $129,000, but none of its loans were in default and all payments were up to date.
The financial consulting firm began its investigation of Tanzer on May 20 and filed a report on the 26th. The report indicated that Tanzer was a viable company and never recommended calling in the loans. The consultant also revealed that by August of that year, Tanzer's debt/equity ratio would have improved by 50% over the previous two years. The report did indicate that Tanzer had a cash flow problem and it recommended an injection of at least $300,000, the reduction of overhead costs, and financial restructuring after the completion of the year's production cycle.
The day after the report was submitted, the Royal Bank walked into the Tanzer plant at 3 p.m. and demanded the immediate repayment of $1 million dollars plus $2,200 interest charges. Tanzer was given 1.5 hours to come up with the money. It didn't.
Johann Tanzer had gone home early for supper that day. He was planning to go back to the plant in the evening to prepare for the next day's production. His son phoned to tell him what was happening. By the time Mr. Tanzer returned to the plant, a locksmith had already changed the locks.
The Royal Bank sold Tanzer's assets to a liquidator for $793,000. The newspaper article claims the assets were valued at $1.5 million. The bank also received $400,000 as a result of a loan being insured by the Quebec Government. In other words, the Royal Bank easily recouped $1 million, but other creditors were left "out in the cold".
In the end, 85 people lost their jobs, and Johann Tanzer lost
everything. The article indicated that he immigrated to Canada in 1956 with $5 in
his pocket, a tool chest, and a "head full of boat designs".
Written by Michael McGoldrick.
© Michael McGoldrick, 1997.