A decision is expected Friday on whether John Risley's CFFI Ventures Inc. must include its significant stake in Cormorant Utility Services Ltd. in a court-supervised sales process aimed at addressing roughly $1.4 billion in debt, or whether the shares should be carved out for a separate sale.
Dispute Over Restructuring Process
CFFI, which owes about $1 billion to senior lender HPS Investment Partners LLC, is seeking approval from the Nova Scotia Supreme Court in Halifax for a sale and investment solicitation process (SISP) to test market interest in its assets under the Companies' Creditors Arrangement Act (CCAA). The main dispute centers on CFFI's shares in Cormorant, which CFFI argues should be included to maximize creditor value through a broad market test.
However, SFPC Quantum LP, a secured lender with rights connected to those shares, contends they should be excluded and handled through a separate sale effort led by Cormorant, allowing the utility to explore refinancing and other alternatives.
Court Questions Alternatives
Throughout Tuesday's hearing, Justice John Keith repeatedly questioned whether a workable alternative process had been presented. He noted, 'We're comparing an existing process that's being proposed to something that's very hypothetical, something that nobody on this call can represent Cormorant will actually do, wants to do or is prepared to do.'
Risley, one of Atlantic Canada's most prominent business figures, built companies across seafood, energy, and telecommunications. He co-founded Clearwater Seafoods Inc., sold for about $1 billion, and Columbus Communications, sold for US$1.85 billion in 2014. However, in March, CFFI entered CCAA proceedings.
Additional Claims and Liabilities
Risley's long-time business partner Brendan Paddick, a major Cormorant shareholder, supports excluding CFFI's stake from the broader process. Paddick is suing CFFI over an alleged unpaid $23-million loan, while the Canada Revenue Agency claims CFFI owes roughly $333 million in taxes, though a reassessment could reduce that amount.
A fairness opinion from Ernst & Young Global Ltd. estimated CFFI's assets would realize about $367 million in liquidation, far below its debt. The court-appointed monitor, FTI Consulting Canada Inc., agreed with that conclusion.
Proposed Timelines
CFFI's proposed SISP calls for notices of intent to bid by July 21 and binding offers by August 11, with a potential auction the following week. SFPC Quantum argues bidders need more time, proposing deadlines extending into late September.
