February 06, 2014 - 9:31am EST by
2014 2015
Price: 0.19 EPS $0.00 $0.00
Shares Out. (in M): 353 P/E 0.0x 0.0x
Market Cap (in $M): 69 P/FCF 0.0x 0.0x
Net Debt (in $M): 34 EBIT 0 0
TEV ($): 102 TEV/EBIT 0.0x 0.0x

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  • Liquidating Trust
  • Liquidation


Workout liquidation play with 20%-30% upside and cash distributions to be paid out to unitholders this year.  The units currently trade at $0.1945 for a market cap of $68.7mm. I believe we will see distributions of $0.23 - $0.25 per unit over the next year as the liquidation completes. The units are surprisingly liquid with a few large funds establishing meaningful positions in the name. 


Arctic Glacier Income Fund (OTC: AGUNF, CNQ: AG.UN) is an income trust that is currently liquidating under creditor protection.  The company used to have a packaged ice manufacturing and distribution business which was sold to HIG Capital in 2012.  The estate is sitting on US$118.1mm cash with proven claims of about $34mm (40% of which are in Canadian dollars aka the Northern Peso).  Most claims are settled and the monitor is putting together a plan of arrangement to distribute the proceeds.  An overview of the current situation is provided in the 14th report of the monitor:


February 22 2012 – Files for CCAA and Chapter 15

June 8 2012 – Sells operating business to H.I.G. Capital for $434.5mm

September 5 2012 – Establishes claims process

October 31 2012 – Claims bar date

Late March / Early April 2014 – Will establish plan or arrangement in order to effectuate distributions to creditors and unitholders

    Mid High Low   Notes
  Cash $118.1 $118.1 $118.1   As at Jan 29 2014
  Tax Receivable $1.6 $1.6 $1.6   US tax refunds remaining
  Change of Control Payments -$9.9 -$9.9 -$9.9   ~C$11mm
  Direct Purchasers Settlement -$10.0 -$10.0 -$10.0   US$10mm
  DOJ Payment -$7.1 -$7.1 -$7.1   Plea agreement entered between   DOJ in which AG agreed to pay US$9mm over 5 years ($2mm has been paid);   Interest accrues at 0.34%;
  Indirect Purchaser Settlement (estimate) -$3.1 -$1.0 -$4.2   max settlement amount of   $3.95mm,  Class Counsel Charge of   $200,000, resulting in a total maximum estate outlay of $4.15 million. 
  Professional Fees (estimate) -$1.5 -$1.2 -$3.0    
  Retail Purchasers Payment -$1.8 -$1.8 -$1.8   13th Monitors report: Canadian   Direct Purchaser Claim has been accepted as filed in the amount of CDN$2   million;
  Interest Payable -$1.0 -$0.5 -$1.7   Estimate - Not yet   established;  Assume 3%-5%, accrual of   6-12 months
  Total Liabilities -$34.5 -$31.6 -$37.7   Total proven claims of $34.495mm   as at Jan 29 2014
  Cash Available to Unitholders $85.2 $88.2 $82.0    
  Shares O/S 353.32 353.32 353.32    
  Estimated Liquidation Value (US$) $0.241 $0.250 $0.232    
  AGUNF US Equity $0.195 $0.195 $0.195    
  Estimated Return 24% 28% 19%    

AGUNF has $118mm in cash and $1.6mm in tax receivables.  I estimate $32mm - $38mm will get distributed to claimants leaving $82mm - $88mm to unitholders, or $0.23 - $0.25 per unit.

Unsettled Claims (p.7 of 14th report of monitor)

Indirect Purchaser Claim - This claim was initially filed for $463.58mm on behalf of a class of US retail purchasers of packaged ice.  The applicants have entered into a settlement agreement for a maximum of $4.15mm. Next steps include the issuance of an approval order on a final basis this month and the claims deadline for the class of June 12 2014.  Due to the nature of the claim process (the need to submit receipts for the number of packaged ice bags you previously bought), I expect total claims to be less than the maximum $4.15mm.

 McNulty Claim – McNulty was a former employee who filed a claim $13.61mm for "blackballing him from the industry".  This claim was disallowed on Sept 12 2013.  McNulty filed a dispute notice on Sept 19 2013.  The monitor submitted the claim to the claims officer for adjudication on Nov 22 2013.  This claim is currently unresolved.  During the Feb 5 2014 court hearing, it was revealed that discussions are productive and this claim could get settled soon. I expect this claim to ultimately be disallowed or settled for a nominal amount.

Peggy Johnson Claim - This $12.259mm claim is made up of $34,000 for royalties on the trade name "Arctic Glacier", $10.5mm for alleged termination of the royalty agreement, $500k for alleged extinguishment of the license, plus interest.  All of these claims except the $34k were disallowed on Apr 12 2013. On May 2 2013 a dispute notice was filed. On Aug 19 2013 it went to the claims officer for adjudication. Unfortunately the hearing is not until fall 2014 and therefore this is the gating factor on the final distribution to unitholders. I expect this claim to ultimately be disallowed or settled for a nominal amount. 

Other – There are $718k of disallowed claims where the dispute period had not expired as of Jan 29 2014.  $500k of this amount recently expired in early Feb.  There is also a $2.194mm claim for California tax in which AGUNF is indemnified and will not absorb any costs.


During the Feb 5 2014 court hearing, the monitor revealed that it is putting together a plan of arrangement in order to distribute cash in the estate to creditors and unitholders as soon as possible.  The monitor estimates that it will have this plan of arrangement ready by late March / early April 2014, with a vote 21-30 days after filing of the plan.  I assume an interim distribution of $0.15 could be paid out in the summer with the remainder by year end.


More cash leaving estate than expected (higher settlement costs for remaining unsettled claims).  Distributions taking too long (as they always seem to).  Plan of Arrangement gets screwed up as this is an income trust (which could make it weird).

This is a low-risk workout with upside of 20%-30% as cash disbursements are made over the next year.  Assuming an interim distribution in summer and final distribution by year end gives an estimated IRR of >35%.


The units also trade in Canada under AG-U.  For some odd reason you can usually buy them cheaper there.  So if you want to save half a penny, buy up north.
I do not hold a position of employment, directorship, or consultancy with the issuer.
I and/or others I advise hold a material investment in the issuer's securities.


- Filing of plan of arrangement
- Cash distribution to unitholders
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