John Risley's CFFI Ventures Inc. is preparing to launch a court-supervised sales process after creditor opposition derailed an earlier restructuring plan that would have handed control of the company's assets to its largest lender, New York-based HPS Investment Partners LLC.
Upcoming court hearing
An upcoming June 9 hearing is expected to focus on the structure and terms of the proposed sales process. The proposed sales and investment solicitation process (SISP) is scheduled to go before the Nova Scotia Supreme Court next month. This follows mounting scrutiny over the valuation of CFFI's assets and its roughly $1.4-billion debt, including about $1 billion owed to HPS.
Background of the dispute
CFFI initially sought creditor protection in March under Nova Scotia's Companies Act in an effort to carry out a restructuring plan that would have transferred many of its assets to entities affiliated with HPS. However, 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.
Paddick is suing CFFI over an unpaid $23-million loan, while the CRA said the company owes it roughly $333 million, a claim CFFI disputes. A prior fairness opinion prepared by Ernst & Young Global Ltd. said the original deal was reasonable because CFFI's assets were estimated at about $367 million, meaning creditors would likely recover no more than that in a liquidation.
Shift to CCAA proceedings
The company later shifted into proceedings under the federal Companies' Creditors Arrangement Act (CCAA), which provides broader court oversight and allows greater participation from creditors. A formal restructuring plan has not been filed under the CCAA process, and CFFI has instead moved toward a formal sales process aimed at testing the market value of its assets.
A SISP is typically used in insolvency proceedings to maximize the value of a company or its assets for creditors and other stakeholders. HPS could still emerge as the successful bidder, but the process opens the door to competing offers and broader scrutiny of the company's valuation.
CFFI's diverse holdings
CFFI owns or holds interests in a wide range of companies across various sectors, including interests tied to renewable energy developer World Energy GH2 Inc., marine services businesses under Horizon Maritime Services Ltd., skincare company Skinfix Inc., and several private investment and financing entities, according to court filings.
Financial outlook
A report by court-appointed monitor FTI Consulting Canada Inc. last week said the company continues to have sufficient liquidity to fund the restructuring process and is projected to have about $6 million in cash by mid-June. The monitor said interim financing is not currently required.
