Winnipeg Free Press - PRINT EDITION

Owner of Ensis seeks protection

Labour-sponsored fund looks to sell portfolio

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LABOUR-SPONSORED fund investors in Manitoba have heard this one before.

The GrowthWorks Canadian Fund, which bought the Winnipeg-based Ensis Growth Fund nearly six years ago, has filed for creditor protection under the Companies' Creditors Arrangement Act (CCAA).

The fund is looking for approval for a court-supervised process for its ongoing management, including selling companies in its portfolio and the refinancing of its more than $25 million in debt obligations to Roseway Capital.

The Vancouver-based fund is also looking at a pair of other possibilities -- finding another lender to pay Roseway out or merging with another fund.

It's all being done under the guidance of Ian Ross, chairman and interim CEO of the fund, who has stepped in after it was announced David Levi was removed as its president and CEO.

The inability to repay that money on a timely basis was the primary sticking point, Ross said.

"The process freezes everybody where they are and provides a bit of time to address some of these issues that we were unable to (find agreement) on a voluntary basis," he said.

"The hope is we get a plan where, over time, we can exit investments, pay out our obligations to Roseway and take the residual proceeds and provide those back to the unitholders, whatever that might be."

Investors in GrowthWorks and, by extension, Ensis, however, shouldn't anticipate much of anything. Dan Hallett, a longtime observer of the labour-sponsored investment fund (LSIF) sector out of Windsor, Ont., said industry sources peg the fund's current net asset value at about $65 million.

"If the fund pays up that full amount Roseway says it's owed, there will be assets left but it will be a devastating loss (for investors)," he said.

The interim CEO pleaded for investors' continued patience.

"The board has to be satisfied if we're going to redeem any shares that we meet the solvency test of the Canadian Business Corporations Act. We are not in a position to do any redemptions until we resolve our issues with Roseway. Until that time, unfortunately, there won't be any redemptions for unitholders," he said.

GrowthWorks' $20-million loan with Roseway in May 2010 "raised a few eyebrows," Hallett said, because even the minimum amount payable would have been "very costly financing." The annual interest rate on the money was 33 per cent.

"So, it was clear back then that liquidity was a problem," he said.

The labour-sponsored Crocus Investment Fund, once the darling of the venture-capital scene in Manitoba, halted trading of its shares and redemptions in December 2004 amid serious concerns about inflated values of the holdings in its portfolio. Crocus was subsequently the subject of a class-action lawsuit and a scathing report from the auditor general before being wound down.

geoff.kirbyson@freepress.mb.ca

Republished from the Winnipeg Free Press print edition October 4, 2013 B6

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