Arctic Glacier Income Fund (CSNX:AG.UN) (the "Fund")
has obtained creditor protection from the Manitoba Court of
Queen's Bench to allow its subsidiaries to continue normal
operations as the Fund seeks new investors.
The Arctic Glacier Income Fund is an unincorporated, open-end
mutual fund trust. The Fund's head office is located in
Winnipeg, Manitoba. Arctic Glacier's operating subsidiaries
manufacture and distribute packaged ice products in Canada and
They operate 39 production plants and 47 distribution facilities
across six provinces in Canada and 23 states in the US, serving
more than 75,000 retail locations. Most of the company's sales
are to resellers such as supermarkets, mass merchants, convenience
stores and gasoline outlets.
The court was told that the principal secured debt of the
business consists of first lien debt of about C$7 million and US$23
million. Second lien debt of about C$58 million and US$152 million
in non-revolving term loans is also outstanding.
In an affidavit supporting the Fund's application under the
Companies' Creditors Arrangement Act (CCAA), Keith
McMahon, president and CEO, said that Arctic Glacier was insolvent
because it was unable to meet an accelerated payment demand from
secured creditors who are owed an amount exceeding C$235
Despite defaulting on its debt, McMahon said the company is
viable, profitable in its operations, and generating strong cash
flow. He said Arctic Glacier continues to be a leading North
American manufacturer and distributor of packaged ice. McMahon told
the court that the business holds the leading market position in
Canada and in most of the markets it serves in the United
In 2010, Arctic Glacier had sales of C$233.5 million and
operating profits of C$48.9 million. The business continues to
generate operating profits and in the past has been able to make
significant cash distributions to its unitholders, the court was
Since 2008 the business has been subjected to expensive
antitrust litigation, poor weather conditions and increased
financing costs. The effect of reduced sales volumes from
unseasonably cool and wet spring weather in 2011 reduced demand for
its products during a period when the business's marketing,
debt servicing and litigation costs were rising.
The court order authorizes the Fund and its operating
subsidiaries to begin a court-supervised recapitalization of the
business through a sale and investment solicitation process. Arctic
Glacier's current lenders have agreed to provide up to $50
million debtor-in-possession financing to fund its operations
during the CCAA process.
In a news release, the Fund said it expects to maintain normal
operations in both Canada and United States without layoffs or
lease terminations. It said that suppliers of goods and services
will be paid as usual, including for amounts owed prior to the CCAA
Alvarez and Marsal Canada has been appointed monitor of the CCAA
proceedings. TD Securities has been retained to conduct the sale
and investor solicitation process which has been approved by the
The monitor has made an application to the United States
Bankruptcy Court in Delaware for recognition of the CCAA
proceedings under Chapter 15 of the US Bankruptcy Code in
order to secure creditor protection in the United States.
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The Canadian bankruptcy regime was designed with two key purposes in mind – provide options to ‘honest but unfortunate' debtors struggling with an unmanageable financial load and create an orderly means for creditors to recover amounts owed them.
The Court of Queen's Bench of Alberta authorized a disposition of a debtor's assets by a receiver immediately upon appointment and without being forced to conduct a marketing process within the receivership proceedings.
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