Risley’s CFFI under scrutiny as court extends stay, orders review of $1.4-billion debt

John Risley is one of Atlantic Canada’s most high-profile business figures, known for building and investing in companies across seafood, energy and finance. Photo by Keith Gosse/The Telegram files

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John Risley’s CFFI Ventures Inc. will remain under court protection after a judge approved an extension of a stay of proceedings, but raised questions about the company’s value and $1.4-billion debt.

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At a hearing on Monday in the Nova Scotia Supreme Court, Justice John Keith extended CFFI’s stay under the Companies’ Creditors Arrangement Act (CCAA) until May 29, allowing the restructuring to continue while a court-appointed monitor conducts further analysis. The stay prevents creditors from taking enforcement action as the case moves forward.

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Keith directed the monitor, FTI Consulting Canada Inc., to assess CFFI’s asset values, examine its debt and clarify creditor claims before further decisions are made in the restructuring.

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At the centre of the case is a proposal that could see CFFI’s largest secured lender, New York-based HPS Investment Partners LLC, take control of the company’s assets as part of a restructuring. The firm is owed roughly $1 billion, according to court filings.

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A prior fairness opinion prepared by Ernst & Young said the proposed deal was reasonable since CFFI’s $367 million in assets were roughly equal to the debt HPS would take on, so creditors would be no worse off than if the company were liquidated.

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CFFI holds investments across industries such as energy, space technology and skincare.

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But several creditors raised concerns during the hearing about both the valuation of CFFI’s assets and the way the debt has been calculated and that those assumptions could materially affect the outcome. If the assets are worth more than previously estimated or if the debt is disputed, it could change how much value is available to other stakeholders.

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Those stakeholders include Risley’s longtime business associate, Brendan Paddick, who is suing CFFI over an unpaid $23-million loan, and the Canada Revenue Agency, which says CFFI owes it $331 million — a claim the company disputes.

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Some parties also called for broader scrutiny of the restructuring process itself, including how the debt is structured, the extent of HPS’s influence over the company and whether a formal sale process should be launched to test the market value of the assets.

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But Keith said the monitor has to complete its work first.

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“I don’t want to pin the monitor down. I have to depend on the monitor’s judgment,” he said during the hearing, adding that the court will rely on the monitor’s findings before addressing competing claims.

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The monitor said it will need time to review documents across CFFI’s portfolio and engage with stakeholders before reporting back to the court. In the coming weeks, the monitor will define its scope of work, review CFFI’s assets, debt and creditor claims and report back before the court moves to the next stage of the restructuring.