Winnipeg Free Press - PRINT EDITION
Arctic headed for auction block
Ice firm to accept proposals for financing or sale transaction
By: Martin Cash
Posted: 02/2/2011 1:00 AM
Arctic Glacier Inc. is about to officially go on the auction block.
The Winnipeg packaged ice company said late Tuesday it will open its books to interested parties, encouraging proposals for a financing or strategic transaction.
Arctic CEO Keith McMahon said a special board committee to search out financial and strategic alternatives that was formed in September has identified several interested parties.
"A sale of the company is the primary one that would come to mind to people," McMahon said in an interview. "But we are opening the door to submissions of proposals from parties, giving them a little discretion as to what they put forward."
He said a sale transaction is one viable option, but the company does not want to discourage submissions that might also include a cash investment or debt refinancing.
The company embarked on the process last fall as a way to explore all its options to deal with a $90-million convertible debenture offering that is due this summer.
With the assistance of TD Securities Inc., which has been working with Arctic since September, the company will make select information available to third parties who wish to participate in the process and enter into a confidentiality agreement.
Arctic was on a buying binge for more than a decade and became the second-largest ice company in North America. It now operates 39 production and 48 distribution facilities across Canada and the United States from California to New York and from B.C. to the Maritimes. Last year, it generated $229 million in revenue.
But a year ago it was forced to negotiate a $9-million settlement with the U.S. Department of Justice to end the company's involvement in an antitrust investigation into the packaged ice industry.
It still has to deal with class-action suits in Canada and the United States related to that antitrust investigation.
Shortly after that settlement, Arctic completed the refinancing of $185 million in long-term debt in the first quarter of 2010, a time when its own creditworthiness was not particularly strong.
But that four-year term loan came with an onerous 12 per cent interest rate and included conditions that do not allow the company to pay dividends or distributions until it is paid off.
At the time, McMahon said: "We had our backs against the wall, but we got it done."
But it has clearly hamstrung the company's ability to move forward and it struck a special committee of the board of trustees to analyze its options.
"We are pleased with the progress to date and remain committed to delivering value to unitholders," said Gary Filmon, chairman of the special committee of Arctic's board of trustees.
Republished from the Winnipeg Free Press print edition February 2, 2011 B6