John Risley ’s insolvent investment firm has struck a deal that would see substantially all of its assets sold through a credit bid tied to more than US$1 billion in secured debt, according to new court documents. CFFI Ventures Inc. entered creditor protection in March owing roughly $1.4 billion, including about US$1.12 billion to New York-based HPS Investment Partners LLC. An asset purchase agreement dated Friday names New Tide Capital LP, an affiliate of HPS, as the purchaser and describes its offer as the “successful bid.” The deal still requires approval from the Nova Scotia Supreme Court, with a hearing scheduled for Sept. 17. The agreement follows a court-supervised effort to find buyers for CFFI that failed to attract any formal notices of intent to bid by the July 21 deadline. Court-appointed monitor FTI Consulting Inc. subsequently terminated the sale process. Justice John Keith described the anticipated deal in letter last week as a credit bid by CFFI’s senior secured creditor, HPS, for “substantially all of the assets and undertaking of CFFI.” A credit bid allows a secured creditor to use debt it is owed to buy assets rather than paying the full purchase price in cash. Under the agreement, New Tide would take on CFFI’s debt to HPS as part of the purchase. A schedule to the agreement assigns about US$1.03 billion of that debt across the assets involved in the deal, although those amounts do not necessarily represent what the individual assets are worth. The agreement says the debt “continues to increase.” The proposed deal follows an earlier attempt to restructure CFFI that also involved HPS. When CFFI initially sought creditor protection in March under Nova Scotia’s Companies Act, it proposed transferring many of its assets to entities affiliated with HPS. But several creditors, including Risley’s long-time business associate Brendan Paddick and the Canada Revenue Agency , raised concerns about the company’s valuation assumptions, debt calculations and the structure of the proposed transaction. A fairness opinion prepared by Ernst & Young Global Ltd. estimated CFFI’s assets at about $367 million and concluded the original deal was reasonable because creditors would likely recover no more than that in a liquidation. Paddick is suing CFFI over an unpaid $23-million loan, while the CRA has claimed the company owes it roughly $333 million, a claim CFFI has disputed. New Tide would not take on Paddick’s claim or other unsecured debts, and the agreement does not say how much, if anything, those creditors could recover. There has also been a development in the CRA dispute. In his letter, Keith also said CRA counsel confirmed that the dispute over taxes allegedly owed by CFFI “has been resolved” and that a document confirming the resolution had been circulated. CFFI’s lawyer told the court he was not aware of the document, prompting Keith to direct the two sides to discuss the matter and update the court. The proposed sale would transfer much of CFFI’s wide-ranging investment portfolio to New Tide, including holdings in renewable fuels, marine services and skin care. But the fate of CFFI’s stake in Cormorant Utility Services Ltd. remains unresolved. Cormorant has its own secured debt with SFPC Quantum LP. CFFI has said about $28.5 million in principal remained outstanding as of May 31. The stake could still be transferred to New Tide if the debt is repaid or refinanced, Quantum agrees, or the court approves the transfer. There is also an unresolved dispute over artwork held by CFFI. Court filings indicate the company holds hundreds of pieces of artwork valued at approximately $8.1 million on its financial statements. Keith previously asked FTI Consulting to address questions involving certain CFFI transactions and assets, including the artwork. The proposed court order would allow Risley to continue claiming ownership of the disputed artwork, with the court ultimately deciding who owns it. Risley is one of Atlantic Canada’s most prominent business figures, known for building companies across seafood, energy and telecommunications. He co-founded Clearwater Seafoods Inc. , which was sold in a deal valued at about $1 billion, and Columbus Communications, which sold for US$1.85 billion in 2014. John Risley’s CFFI gets green light for asset sale process amid $1.4-billion debtJohn Risley’s CFFI faces fight over key asset in $1.4-billion restructuring battle • Email: arankin@postmedia.com
John Risley’s CFFI strikes deal to sell assets to affiliate of US$1-billion creditor
