Icemaker Facing Heat Over Finances

The current wave of North American heat may be too little too late to save the Winnipeg Arctic Glacier from a different financial ties.

After enduring three years of legal challenges, the operating profit of packaged ice company collapsed so badly, that is about to default on the part of its senior debt.

The company is now forced to negotiate changes in terms of $ 185 million loan agreement with banks that have recently forced to convert to another debt to equity offerings.

Keith McMahon, President and CEO, will have to negotiate changes in the capital west wall (and Canada Pension Plan Investment Board), to avoid the default of the loan in February 2010.

Even in good times, perhaps many executives cringe at the thought of dealing with the west face, the lender and shareholder activist who forced the Maple Leaf Foods powerful to yield to his claims earlier this year.

In an interview Tuesday, Mr. McMahon said that the first time that the company’s current lenders were the ones who actually forced the company to make $ 91 million debt issue of fairness.

The debt conversion is based on a formula that could mean as many as 270 million new units will be issued, almost wiped off the value of 40 million units by existing investors.

Investors call for a disaster, and some are even leaders call the management and the board, who let them.

But McMahon said the company was left with no choice.

One corporate finance executive, who asked that his name not be used, said, “There would have been a simple and elegant solution — amend and extend the convertible debentures.”

But McMahon said that card was not available for Arctic to play.

“To amend and extend the convertible bonds is that it has secured lenders to accept that,” he said. “And very late in the process, group lending has been very clear that they would not approve the transaction.”

It comes at a time when revenues are in decline, below $ 45 million about $ 60 million. This means that Arctic Glacier is no longer able to carry the level of debt that he had worn.

“From our point of view sees lenders senior convertible bonds as an instrument which has $ 6 million of interest resulting from the company every year,” he said. “They were able to prevent this from continuing, and they did.”

Now McMahon has to negotiate new terms with those same lenders from an extremely vulnerable position.

A string of calamities that started with an antitrust investigation in 2008 has left Arctic Glacier battered and bruised.

More than one corporate finance expert spoken to say it would not be uncommon in such circumstances for a receiver to be brought in.

To top it all off, a massive Canadian shareholder class-action, which has been certified by the Ontario Court of Justice three months ago, is likely to end in another expensive solution for the cash-strapped operation.