The towering seven-storey superstructure that will sit atop Canada’s newest naval supply ship weighs 2,200 tonnes and is outfitted with cabins, provision stores and all of the vessel’s public areas. It is a key part of the ship and it cost tens of millions of dollars to build, enough to employ 400 people at its peak and provide a badly needed boost for a shipyard that was, until recently, on the verge of collapse.

In 2013, this shipyard was on its knees. The owners had announced plans to close it, putting 650 people out of work and ripping the heart out of a community where shipbuilding had been a way of life for centuries. Now, rows of soaring cranes dance above sleek warehouses.The sprawling yard is busier than ever, and nearly all the jobs are back.

This is a revival sparked by a Canadian contract, but the yard is not the Chantier Davie Canada Inc. shipyard in Lévis, Que., which was awarded a controversial sole-source deal by Ottawa to build the vessel and make Quebec a boat-making powerhouse in the process. It is Rauma Marine, a resurgent Finnish company in the small port town of Rauma, 250 kilometres northwest of Helsinki, where much of the work is actually being done.

The shipbuilding project worth an estimated $667-million Canadian, according to the RCMP, is at the centre of a criminal probe of Vice-Admiral Mark Norman, the second-highest-ranking member of the Canadian military. Vice-Adm. Norman, who has been suspended as vice-chief of the defence staff, is alleged to have leaked secrets to help Davie pressure the Liberal cabinet into sticking with a project the Conservatives awarded the day before the 2015 election campaign began. On Aug. 1, 2015, the Tories signed a letter of intent, the first step to a contract and one that committed Ottawa to a break fee of as much as $89-million.

The Liberals were concerned about the viability of the shipbuilder, and the leaks hindered cabinet from doing due diligence on the plan, which was meant to revive the struggling Davie as Quebec was attempting to position itself as a transatlantic trade hub. But as the Finnish connection shows, not all of the work is being done in Quebec, and there are questions about the long-term value of the deal for Canadians.

A Globe and Mail investigation has discovered that Davie is owned by a complex web of companies that can be traced from Canada and the United Kingdom to the tax havens of Monaco and the British Virgin Islands.

In addition, the investigation revealed that the company – which bills itself as the country’s largest shipbuilder – has borrowed hundreds of millions of dollars from lenders of last resort, including Bay Street financier Newton Glassman and a small financing firm whose directors own a Windsor, Ont., paving company. These lenders extend credit to distressed companies at annual interest rates of up to 25 per cent.

Alex Vicefield, a former British fencing champion and chief executive offier of Inocea Group, an offshore consortium that bought Davie five years ago, said the ownership group is not public information.

“It is a blend of Western European private investors and major U.S.-based financial institutions and banks,” he said.

He acknowledged that the company approached Canadian banks for financing, but said that without a final contract in hand, “there was far too high a risk for a normal bank to finance.”

The Quebec government also provided a $14.2-million interest-free loan to Davie in December to address the company’s “short-term liquidity problems.” The province and Davie are in a commercial dispute over a contract to build two ferries, which have faced significant delays and a $100-million cost overrun.

Mr. Vicefield said he did not want to discuss the ferry dispute and defended the decision to outsource part of the supply-ship project to Finland, saying Davie could not have delivered the ship to the navy on time this fall had it done the work in Quebec.

Project Resolve

The deal with Davie, dubbed Project Resolve, is unusual. Instead of buying a ship, the Canadian military will rent the vessel, even though the money Ottawa is spending is equivalent to – or more than – what it costs NATO allies such as Norway and the Netherlands to purchase similar supply vessels. Davie’s backers, not Canadian taxpayers, still own the new ship at the end of the day.

The Globe has also learned that ownership of the new naval-support ship has been placed in a separate corporation, called Asterix Inc. In the event that Davie and its sister company Federal Fleet Services go into bankruptcy, creditors cannot seize the ship.

“This is quite a standard thing,” Mr. Vicefield said. “The way ship companies work is for every ship you own, you put it in a single-purpose company.”

The federal and Quebec governments have poured hundreds of millions of dollars into the shipyard over the past decade, including a $229-million federal Export Development loan to the previous owners for three offshore exploration ships for the oil industry. Only one of those ships was completed at Lévis in 2014.

Vice-Adm. Norman championed the Davie supply ship when the Trudeau Liberals swept to power in the fall of 2015. The Liberals decided to review the plan after Canada’s Irving Shipyards and Vancouver-based Seaspan – owned by a U.S. firm – said they could do it for half the cost and in less time.

Before the 2015 election, the Harper cabinet circumvented the government’s own rules to bypass an open competition and hand the supply ship project to Davie, which is based in the riding of then-cabinet minister Steven Blaney.

The RCMP allege in an affidavit filed in court that Vice-Adm. Norman divulged cabinet deliberations to one of the executives of the shipyard and helped devise a media and lobbying campaign to pressure the Liberals to go ahead with the contract.

The Mounties obtained e-mails from Vice-Adm. Norman to Spencer Fraser, CEO of Federal Fleet Services, the company in charge of the navy supply vessel project. The RCMP allege those e-mails reveal the admiral shared confidential information with Mr. Fraser, who passed it to other shipyard executives, including the British owners.

Davie was passed over for major federal government shipbuilding contracts in a 2011 disbursement of work because it was insolvent and under court protection from creditors. The bulk of big-ticket military and non-military work went to Irving’s Halifax shipyard and Seaspan in Vancouver. The Davie shipyard emerged from bankruptcy protection in November, 2012, after it was bought by new owners, and began lobbying Ottawa hard for major work.

Financial records in foreign registries appear to indicate that Davie is owned by ZM Industries Ltd. of the U.K., which in turn is owned by ZM Offshore Management in the British Virgin Islands. Records also show that Federal Fleet Services is owned by Inocea U.K. Ltd.

Inocea and ZM Industries have identical directors, whose addresses are listed at a small accounting firm in a rundown area of mid-London. The Globe was unable to determine all the owners of ZM Offshore Management. A British Virgin Islands official declined to release a list of directors of ZM Offshore.

Mr. Vicefield told The Globe he and Davie shipyard president James Davies are the main principals of the three offshore firms, although he acknowledges there are other investors based in Western Europe and the United States, whom he refused to name.

“The actual structures are more complex than actually the way it is, which is a fairly simple organization owned by a group of individuals with different financial institutions backing us on different projects,” Mr. Vicefield said. “If you are looking for the ultimate beneficial owners of all it, you know, it is myself and Mr. Davies and then amongst different companies, there are financial investors who invested in different subsidies.”

Inocea and ZM Industries have borrowed heavily from lenders that specialize in distressed firms in need of a lot of cash to turn things around. The financing – at high-percentage returns – was used to refit the navy supply ship, and to assist in building two high-tech car ferries, contracted by the Quebec government at a cost of $125-million.

Toronto-based Callidus Capital Corp. lent $318-million to Inocea and ZM Industries, which used $309-million of that money, The Globe has learned. Callidus was paid interest rates in the high teens, according to a source with knowledge of the transaction.

Callidus – headed by financier Newton Glassman – bills itself as a lender of last resort that provides “fast, flexible and creative funding solutions to companies that cannot access traditional lending sources.” The company reports that it makes returns of 17 per cent to 19 per cent on loans. But Mr. Vicefield said in a telephone interview from Monaco that the overall cost of the borrowing was 3 per cent to 4 per cent. A source told The Globe that Callidus does not lend money at those low rates.

“It has been a great project from the financing perspective because we have been able to borrow at rates that are lower than the normal level,” Mr. Vicefield said. “That’s because of the credit worthiness of the federal government. That is why we are down at the 3- to 4-per-cent interest rates.”

The loan from Callidus was paid off in March, and Mr. Vicefield found new financing of $385-million from U.S. Bank National Association. That debt was then resold to JPMorgan and Anchorage Capital – a New York hedge fund that specializes in distressed companies and is known to be secretive about its clients.

The shipyard also registered a $57.5-million loan in March with Bridging Finance Inc., a firm whose directors own Coco Paving of Windsor, Ont. Mr. Vicefield said this financing was for the ferry project to help the shipyard’s cash flow while awaiting payment from the Quebec government for labour tax credits, he said.

Financial filings for collateral on the loans Davie owners have taken out show an annualized interest rate of 25 per cent. The holding companies put up the shipyard and Federal Fleet Services as collateral.

‘Full capacity’

Mr. Vicefield played down the high-risk financing and talked up the naval project as a boost to Quebec’s economy through shipyard jobs and purchases from hundreds of domestic suppliers. He was less willing to discuss the ferry project.

Quebec’s provincial ferry corporation, Société des traversiers, has already paid $125-million to Davie for the two ferries. This includes a $20-million payment that was made “under protest,” meaning that the provincial agency has reserved the right to seek repayment at a later date, according to a spokeswoman for the agency.

“I am not going to talk about the ferry dispute with the Quebec government,” Mr. Vicefield said.

A senior provincial official described the haggling over the two ferries as a mere “commercial dispute,” with Davie and the provincial Société des traversiers unable to come up with a final price tag for the vessels.

An independent arbitrator is being hired to determine the formal value of the two ferries, who owes what to whom, and to put an end to the $100-million cost-overrun dispute, a provincial official said.

The Quebec government is doing everything in its power to boost the fortunes of the struggling shipyard, stating it is convinced the current ownership team has a long-term strategy to win future contracts.

In an interview in their offices near the shipyard in an industrial part of Lévis, officials of the union that represents the Quebec shipyard workers said they signed a five-year contract with Davie last year to bring stability to the shipyard and be in a position to win additional federal contracts after Project Resolve is finished.

They said the shipyard is operating at “full capacity” these days, with about 1,400 unionized workers, administrative staff and subcontractors working on the supply ship and the ferries. They said the superstructure on the refuelling vessel would have ideally been built at their shipyard, but agreed with the company’s decision to do the work in Finland in order to meet Ottawa’s deadline.

They have no idea what will come after these contracts, with nothing in the order books that they know of, but hope that Davie will find its next act.

“We are starting to have job security, families are moving here, we know the value of having work,” said Steeve Sanschagrin, a steelworker and union official. “We have gone through years of misery. Now that we are working, we don’t want to lose it.”

A contract questioned

Mr. Vicefield and his partners sold the former Conservative government on the ship-leasing proposal after a 2014 fire destroyed the 45-year-old HMCS Protecteur, the last supply ship for the Royal Canadian Navy. The navy has been relying on countries such as Spain and Chile to replenish its ships at sea.

The British entrepreneur and his partners bought a commercial vessel, the MV Asterix, in Europe for $20-million (U.S.) and are transforming it into what he says will be a $500-million interim oil-replenishment ship to lease to navy.

Mr. Vicefield insisted there is no risk to Canadian taxpayers, because his companies do not get paid until the supply ship is operational and the leasing payments kick in.

“We guarantee a fixed rate and we don’t get paid until we deliver that service. There is no mechanism for cost overruns. There is no money from the Canadian taxpayer until we actually deliver,” Mr. Vicefield said.

He maintained his companies will get paid far less than the $667-million (Canadian) identified by the RCMP in court documents. The government has said the supply-ship contract will cost Canadian taxpayers as much as $587-million, which includes five years of in-service support.

Mr. Vicefield said the lease contract is valued at $300-million, plus $150-million operational costs, over five years. Ottawa has an option to renew the lease for another five years as well as to buy the $500-million ship.

Kevin McCoy, president of Irving Shipbuilding, said his company could have supplied the same ship for much less, arguing the Halifax shipyard could convert an existing vessel and lease it to Ottawa for six years, “including maintenance … and a Canadian crew,” for $220-million. The work would have been done in Halifax and been ready last year, he said.

The Davie project, by comparison, was awarded in late 2015 and the ship is scheduled to be ready for service this fall.

Knut Arne Trellevik, director of Tudor Shipping Ltd., a ship brokerage, agency and consultancy, said Canada could have bought a similar ship for considerably less than the leasing arrangement it has with Davie. “The government in the U.K. and Norway and Denmark ordered the same ship from South Korea and the bill was $175-million all in, a complete ship,” he said.

He also pointed out that the naval supply ship is owned by Asterix Inc., which leases it to Federal Fleet Services, which will then lease it to the navy.

“So Asterix will always get the money, but if Federal Fleet Services goes bankrupt, Asterix is not bankrupt. The ship-owning company Asterix will not be part of the bankruptcy and they are within their legal right to do this,” he said.

A Finnish revival

For companies around Rauma, the Canadian project has been a boon. The contract for the superstructure came just after the city bought the local shipyard from its South Korean owners and had begun trying to lure companies to the renamed Seaside Industry Park. Rauma Marine was formed at the same time by a group of local shipworkers, backed in part by the Finnish government. At its peak, the Davie project employed 400 workers in the shipyard, with Rauma Marine drawing on suppliers from across the region. The Davie contract was crucial to “keep [Rauma Marine] alive and continue their business,” said Timo Luukkonen, a city official who manages the shipyard.

And more work could be coming. The company that designed the superstructure, Almaco, is based in nearby Turku, and it hired Rauma Marine to do the construction work. Almaco has signed a technology transfer agreement with Davie, which Almaco officials believe will lead to more business in Finland.

Even if the Davie connection ends, the Canadian contract has already helped kickstart a revitalization of the shipyard. Today it is busier than ever with a major ferry project and clients from as far away as Dubai. There is new equipment in the yard, a steelworks operation, an assembly centre and docking areas that allow firms to build ships and large components onshore and then load them on to barges for quick delivery. More than 30 specialized companies have set up here and the city government is spending €100-million to make the waterway deeper so it can handle even larger vessels.

Mr. Vicefield said the Davie contract amounts to about $60-million in payment to the Finns. He said this represents less than 15 per cent of the overall contract between Davie and Ottawa.

The Trudeau Liberals were concerned about the financial viability of the shipyard and the cost of the navy ship when they formed the government and launched a review in late fall of 2015.

Treasury Board President Scott Brison told that RCMP that leaks to Davie executives prevented cabinet from doing its jobs to properly analyse the navy project as political pressure mounted in Quebec City for Ottawa to approve the contract.

“The renderings of this [classified information] into the public domain did an awful lot to limit our ability to really do what [the committee] intended to do, and that is more due diligence on this,” Mr. Brison is quoted saying in the RCMP affidavit.

In the end, a senior government official said, cabinet approved the deal because it would have cost $89-million to get out of it. Opening the competition would also have “significantly delayed” the supply vessel, badly needed by the navy to refuel its frigates at sea.

“We inherited a turd,” a senior official told The Globe.

On Friday, RCMP spokeswoman Corporal Annie Delisle said the force’s investigation into the leak of classified information continues.

Meanwhile, the new naval supply ship’s superstructure entered the Gulf of St. Lawrence on Friday, pulled by the tug Fairmount Glacier, which is due to arrive in Quebec City shortly.