Chilly year in packaged ice New suitor for Arctic Glacier

Dallas-based Reddy Ice Holdings Inc., the largest packaged ice company in North America, has disclosed its intention to acquire the assets of Winnipeg's Arctic Glacier Income Fund, the second-largest ice company.

Reddy Ice also confirmed Thursday it will be seeking bankruptcy protection.

The company disclosed in filings the restructuring plan it is proposing includes the intention to acquire the assets of Arctic Glacier, which itself filed for bankruptcy protection in late February.

Arctic is going through a sale and investor solicitation process to find investors to take over the financial backing of the company from its secured lenders.

Arctic announced Thursday Reddy Ice has submitted an offer for the company, but would not disclose any details of the offer or how many other offers it may have received.

The Winnipeg-based company said it has received a number of letters of interest and has qualified several of them -- including the one from Reddy Holdings -- to proceed to the next stage where additional information will be made available to those bidders asked to make binding proposals.

The company said it is expected to require a period of several weeks to complete that stage and there is no assurance any transaction will occur.

Although some financial industry officials familiar with these companies say such a merger makes sense, it would be ironic since both Arctic and Reddy were subjected to an intense antitrust investigation in the United States, starting in 2008. The issue concerned agreements between various packaged-ice companies to stay out of each other's territory.

The lengthy investigation started just after a period where both Arctic and Reddy had been engaged in a flurry of acquisitions of independent ice companies. Some experts now say both companies paid more than those companies were worth and in the process racked up crippling levels of debt.

The timing of the U.S. Department of Justice investigation also coincided with the start of the recession and global credit crunch that left both companies hobbled with expensive debt, millions in legal bills, uncertainty over ongoing civil suits and a $9-million fine to Arctic.

But there are some who say it is likely the regulatory issue has been thought through and it will be approved.

Reddy Holdings' intention to file a prepackaged voluntary proposal under Chapter 11 of the U.S. Bankruptcy Code is being led by the $17-billion hedge fund, Centerbridge Capital.

One source said he thought the regulators would approve the deal. "Centerbridge has very capable advisers and have been working on this deal for months."

Unlike the Arctic Glacier filing under the Companies' Creditors Arrangement Act, Reddy's proposed Chapter 11 filing already has a financial restructuring proposal in place.

The complicated proposed transaction provides that holders of Reddy's common shares would receive 12 cents a share and an additional five cents a share in the event the Arctic acquisition is consummated.

That valuation has led at least one source familiar with both companies to suggest it may mean Arctic might garner a price for its assets that would leave something for Arctic shareholders. Previously, most believed that would not be the case.

Reddy Holdings and Arctic Glacier shares slumped so badly through the last year both were delisted from the NYSE and the TSX respectively. They now trade on over-the-counter exchanges.

Reddy's shares doubled Thursday to 14 cents from seven. Arctic's units were up one cent to seven cents.

Reddy's restructuring proposal is designed to be completed within 45 days, so it would be out of bankruptcy protection in time for the Arctic bids to be evaluated.

martin.cash@freepress.mb.ca

Arctic GlacierReddy Holdings

Revenue $237.1*$328.5

EBITDA$43.6$44.1

Net loss$84.9$69.5

Total debt$290$471.5

*all figures in millions for the year ending Dec. 31, 2011

Republished from the Winnipeg Free Press print edition April 13, 2012 B4