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Winnipeg Free Press - PRINT EDITION
Bidding for Arctic ends, no word on results
U.S.'s Reddy Ice intended to make offer for local firm
BIDDING on the assets of Arctic Glacier Income Fund was supposed to close at the end of the business day Monday.
Neither officials from the Winnipeg packaged ice company nor representatives of the court-appointed monitor, Alvarez & Marsal, would comment on the bids.
But a couple of people with ties to the company said regardless of how many bidders there may be for Arctic, the court-sanctioned process was really all about one bid -- from Reddy Ice Holdings.
The Dallas-based packaged-ice company, which was recently in and out of bankruptcy protection itself, made it clear in its court filings that a major strategy in revitalizing its fortunes was to make an offer to acquire Arctic.
Although Arctic officials said they had received a number of letters of interest in their first round of investor solicitation, Reddy was the only entity to disclose its involvement.
Reddy is larger than Arctic -- $328.5 million versus $237.1 million, respectively, in revenue in 2011 -- but both companies succumbed to a series of events that dramatically reduced their steady stream of profits and drove them into bankruptcy protection.
Arctic and Reddy were embroiled in a U.S. Department of Justice antitrust investigation into the packaged-ice business that started in 2008. It cost them millions of dollars in legal fees (and millions more in settlements for Arctic).
The companies were also hit with ballooning financing costs when they were forced to refinance debt in the middle of the 2008-09 credit crunch, saddling them with double-digit interest rates.
Then they suffered through an unseasonably cool 2011, reducing ice demand in Canada and the United States. Profits declined so much, Arctic fell into breach of its tough loan covenants.
Arctic filed for Companies Creditors Arrangement Act (CCAA) protection in late February. Included was a plan to seek investors for all or part of it assets. It was a deadline-driven process, as opposed to efforts to recapitalize the company for 11/2 years before the CCAA filing.
Reddy filed a voluntary plan of reorganization under Chapter 11 of the U.S. Bankruptcy Code in April. It proposed a financial plan to eliminate about $140 million of debt and quickly re-emerge from protection. It wiped out about one-third of its debt and injected $25 million in new equity and emerged from Chapter 11 last week.
The main difference between the two scenarios is Reddy had lined up a backer in the private equity firm Centerbridge Partners. The schedule was designed so Reddy would be free of court protection to meet the deadline of Arctic's investor-solicitation process.
An industry observer said Reddy's disclosure of its intentions to bid on Arctic might have dissuaded other parties from making an offer.
"The announcement that Reddy was in the mix probably threw some cold water onto the other bidders," said the official, who spoke on condition his name was not used. "My gut would say that was the whole intent of why they announced they were part of the transaction."
There are differing views as to how U.S. regulators would view such a merger -- especially in light of the fact the two companies were in the thick of the antitrust investigation involving deals to stay out of each other's regions.
One industry observer said he would be surprised if U.S. regulators allowed the transaction.
"I think it would give the U.S. Department of Justice's antitrust division heartburn in terms of how much market share the new company would have in certain markets," he said.
Republished from the Winnipeg Free Press print edition June 5, 2012 B3
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