John Risley’s CFFI strikes deal to sell assets to affiliate of US$1-billion creditor

John Risley is one of Atlantic Canada’s most prominent business figures, known for building companies across seafood, energy and telecommunications. Photo by Keith Gosse/The Telegram files

Article content

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.

Article content

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.

Article content

Article content

Article content

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.

Article content

Article content

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.

Article content

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.”

Article content

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.

Article content

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.”

Article content

Article content

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.

Article content

Article content

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.

Article content

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.

Article content

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.

Article content

There has also been a development in the CRA dispute.