A dispute over the future of

John Risley’s
CFFI Ventures Inc.

has intensified as the company shifted its $1.4-billion

debt restructuring

into federal court following challenges from creditors who opposed a plan that would have handed the company’s assets to its largest lender.

The Supreme Court of Nova Scotia last week granted CFFI’s request to proceed under the

Companies’ Creditors Arrangement Act

(CCAA), allowing the company to restructure its debt under federal supervision.

FTI Consulting Canada Inc. has been appointed as the court monitor, tasked with

overseeing the restructuring process

and ensuring that creditor interests are protected.

CFFI, which has holdings across a wide range of industries, including energy, space technology and skincare, in February filed a plan under the

Nova Scotia Companies Act

(NSCA) to transfer its assets to its biggest creditor, a group affiliated with New York-based HPS Investment Partners LLC, as part of a broader effort to restructure the debt.

CFFI abandoned the provincial process last week following strong opposition from some creditors, including longtime business associate Brendan Paddick, who is suing the company for $23 million over an unpaid loan.

In court filings, Paddick said the original provincial plan would have allowed HPS to determine the value of its own claims without independent oversight. He also said any sale of CFFI’s assets should occur under the federal CCAA process.

Under the NSCA, the restructuring would have involved relatively limited court supervision. CFFI said in a statement on Thursday that it still plans to proceed with the HPS takeover, but under the federal CCAA process.

Designed to allow large insolvent companies to continue operating while restructuring under protection from creditors, the CCAA also gives debt holders more voting rights than the provincial law. Restructuring under the federal law is typically more expensive because of higher legal and financial advisory costs.

Other stakeholders, including the

Canada Revenue Agency

, also raised objections to the company’s proposed restructuring under the provincial process. The agency said CFFI owes it $331 million, a figure the company disputes.

The CRA also said the provincial plan was effectively controlled by a single creditor that stood to benefit from the transaction, with no independent sales process in place. The arrangement would have left creditors uncertain about whether the sale of assets would deliver the maximum possible return, the agency said.

Risley is one of Atlantic Canada’s most high-profile business figures, known for building and investing in companies across seafood, energy and finance. He co-founded Clearwater Fine Foods Inc., which was sold for $1 billion, and Columbus International Inc., a Caribbean communications company that sold for US$1.85 billion in 2014.

Court filings said the HPS loan started at US$250 million in 2017 and reached nearly US$1 billion after interest accrued when CFFI stopped making payments. To help reduce its debt, CFFI has been selling valuable assets such as artwork and private aircraft.

The move to the federal CCAA process won’t change CFFI’s plan to transfer assets to HPS, Risley said in a text message on Friday.

• Email: arankin@postmedia.com

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