CFFI Ventures: a carve-out that would have left the court blind and deaf

CFFI Ventures Inc. is a holding company. What it holds is artwork and a range of equity investments — which is why, as Justice Keith puts it, it is not proposing to emerge from these proceedings as a rehabilitated operating entity. It is proposing to sell everything, per *CFFI Ventures Inc. (Re.)*, 2026 NSSC 195, para. 35.

Every party at the hearing agreed some form of sale and investment solicitation process was appropriate. What they fought about was whether one asset should be in it.

The debt, and the size of the uncertainty in it

The HPS Creditors — HPS Investment Partners LLC as agent and lead arranger, together with three mezzanine funds — hold security in substantially all of CFFI's present and after-acquired personal property and interests in capital stock, securing obligations under a Note Purchase and Guarantee Agreement dated October 23, 2017 and amended and restated April 25, 2019.

The original principal was about US$250 million. The monitor places the balance at approximately US$1.118 billion as at March 13, 2026, the growth driven by years of default interest with compound interest as a major factor.

The monitor also acknowledges that the calculation is complicated and, depending on issues of contractual interpretation, the figure could be as low as US$790.3 million, per 2026 NSSC 195, paras. 1, 3.

A range of roughly US$328 million, turning on how a credit agreement is read, is worth pausing on. It is not a modelling assumption. It is the difference between two defensible readings of what the borrower agreed to pay.

CFFI began with a plan of arrangement under the Nova Scotia Companies Act, saw the responses from certain creditors, and pivoted to the CCAA, with FTI Consulting Canada Inc. appointed monitor as the statute requires, per 2026 NSSC 195, para. 4.

The Canada Revenue Agency originally estimated its claim at $332 million. That was contested and reviewed; the reassessment is complete and reduces the claim without changing CRA's status as an unsecured creditor. CRA took no position on the SISP, per 2026 NSSC 195, para. 11.

The one asset with a different priority on it

The exception to HPS's first position is CFFI's shareholding in Cormorant Utility Services Limited.

SFPC Quantum LP advanced funds to Cormorant under a credit agreement amended and restated March 28, 2025 — originally $41.26 million, approximately $28.5 million outstanding at May 31, 2026. CFFI guaranteed that debt on May 24, 2022, and its guarantee obligations are secured by Quantum's security interest in all Cormorant securities CFFI owns or acquires.

By a subordination agreement of the same date, HPS agreed to subordinate its security in the Cormorant collateral to Quantum's. So Quantum ranks first on CFFI's Cormorant shares, and behind HPS on everything else, per 2026 NSSC 195, paras. 6–8.

The cap table matters to what follows. CFFI owns 38.77% of Cormorant fully diluted — and, the judge notes in a footnote, is actually the majority shareholder on an undiluted basis. Brendan Paddick owns 35.16%, Quantum 10.03%, and unnamed employees the remaining 15.05%, per 2026 NSSC 195, para. 7.

Cormorant did not file. It is a closely held, non-filing company in which the debtor happens to hold the largest block.

What each side wanted

CFFI and the monitor wanted one process covering everything, with a credit bid by the HPS Creditors included as a feature that establishes a floor value, and Qualified Bids required to repay the HPS debt in full in cash on closing unless HPS agrees otherwise — individually or in combination, per 2026 NSSC 195, paras. 17, 25.

The mechanics are tight. Notices of intent to bid by July 21, 2026; binding Qualified Bids by August 11, 2026; each bid capable of closing within 45 days of selection, binding and executed, supported by evidence of fully committed financing, not conditional on further due diligence or financing, and accompanied by an irrevocable commitment to complete, per 2026 NSSC 195, paras. 16–17.

Quantum and Mr. Paddick wanted the Cormorant shares excluded and moved into a separate, standalone strategic process that Cormorant itself would drive — opening up refinancing, a new equity injection, or a standalone sale of the business as a going concern. They argued Cormorant would be highly incentivised to maximise the value of its own shares; that contractual restrictions in shareholder and credit agreements might complicate any transfer, complications a consent-based process would avoid; and that as first-ranking creditor over that collateral, Quantum's views deserved corresponding weight, per 2026 NSSC 195, paras. 28–32.

The judge's summary of the dispute is the cleanest sentence in the decision: it "pits a debtor advocating for a comprehensive, court-supervised, market process designed to maximize value against a secured creditor seeking to protect its first-ranking priority rights and resist a process that it says may constrain realization of value for that particular asset", per 2026 NSSC 195, para. 12.

The framework

The decision sets out five foundational principles before reaching the specific test, and they are usefully assembled in one place: the CCAA's flexible, court-centred character anchored in s. 11 (Century Services, 2010 SCC 60 at para. 14); the now-commonplace liquidating CCAA (9354 Québec inc. v. Callidus Capital Corp., 2020 SCC 10 at para. 42); the supervising judge's unique role and positional advantage (9354 at paras. 47–48); the constraints of appropriateness, good faith and due diligence (9354 at para. 49); and the monitor as a mandatory presence with fiduciary obligations to the court — its "eyes and the ears" (9354 at para. 52), per 2026 NSSC 195, paras. 33–39.

The specific test draws on Re SaltWire Network Inc., 2024 NSSC 89 at para. 27 — fair, transparent, commercially efficient, cost-effective, preserving the integrity of the CCAA process — and the Nortel factors: is a sale warranted now, will it benefit the whole economic community, do creditors have a bona fide reason to object, and is there a better viable alternative. Those are guides, not a checklist, and are to be evaluated with an eye to the s. 36(3) considerations that will apply when approval of a concluded sale is later sought, per 2026 NSSC 195, paras. 40–44.

On the SaltWire formulation of the last factor, the question is put "in very simple terms: does any person have a better idea?"

Why the better idea failed

Justice Keith did not dismiss Quantum's arguments. He said they possessed "a number of appealing qualities" and accepted much of their premise — that Cormorant would be highly incentivised, would not want its share value artificially deflated, might creatively deploy more strategic options including recapitalisation or equity offerings, and that there were real contractual and confidentiality frictions a consent-based process would avoid, per 2026 NSSC 195, para. 57.

Then the problem: nothing connected any of it to a concrete plan.

Greater flexibility in developing a plan to maximize value only becomes a strength where there is some visibility around how this flexibility will be used and how it will yield a result that achieves the goals and objectives of the CCAA and the Nortel factors. Sincerely held optimism around a yet-to-be formed plan (or the elusive promise of a better plan) is insufficient, in my view, and only risks further uncertainty and delay.

Per 2026 NSSC 195, para. 58.

The second problem was Cormorant itself. Its counsel said management preferred the standalone process — but could not say Cormorant opposed the SISP, and confirmed Cormorant would support the court's decision. Cormorant still had no plan to put before the court, only a willingness to prepare one quickly if the concept were approved. Counsel expressed a "general concern" about confidential information but could offer no details, per 2026 NSSC 195, paras. 59–61.

The judge's explanation for that vagueness is generous and still fatal. Cormorant's five-member board is split: two directors support the SISP, two oppose it, leaving the CEO "squarely in the middle of two conflicting views — including two opposing, major shareholders". The caution was understandable. "Nevertheless, I am compelled to say that the resulting vagueness and uncertainty is problematic", per 2026 NSSC 195, paras. 62–63.

A company proposed as the manager of a court-supervised process cannot give the court a straight answer about whether it wants the job, because its own board is deadlocked on the question.

The reason that travels

The third objection is the one worth taking away from this decision, because it applies to every proposal to run part of an insolvency outside the main process.

A standalone process controlled by Cormorant would diminish the monitor's role. And the monitor is how the court sees:

The Court would be rendered somewhat blind and deaf — at least when compared to what would occur under the SISP. Instead, Cormorant (who is not an officer of the Court) would assume a more dominant role.

Counsel for Quantum properly pointed out that the alternative would still be subject to court supervision. The answer given is structural rather than practical: the monitor's appointment is mandatory under the CCAA, and "this basic statutory fact speaks to the importance which the legislature places upon the Monitor's involvement. Plans that would diminish the Monitor's role should be approached with a degree of healthy caution", per 2026 NSSC 195, para. 64.

The judge adds one further concern: that Quantum, as Cormorant's first-ranking creditor, might gain increased leverage or influence in a process Cormorant ran.

What the objectors did get

The SISP was approved — but not exactly as filed, and Quantum's participation shaped it in three ways.

Amendments Quantum suggested and CFFI accepted improved information-sharing and the obligation to consult, extending those rights beyond the HPS Creditors to Quantum. Those amendments are part of what satisfied the judge the process was fair and transparent, per 2026 NSSC 195, para. 48.

Second, the judge imposed a condition of his own. He shared Quantum's reservations about marketing and accepting bids over the summer, and would approve the SISP only if the monitor, with input from the sales advisor, may extend each deadline by two weeks where it deems that reasonably required and concludes it will optimise the process. CFFI had proposed a single two-week extension; "I respectfully disagree", per 2026 NSSC 195, para. 52.

Third, the objection is preserved rather than spent. Any concerns about how the bidding and evaluation unfolded in respect of the Cormorant shares — including in respect of an HPS credit bid — can be aired at the approval hearing, per 2026 NSSC 195, paras. 26, 53.

Mr. Paddick asked for the same information and consultation rights as the first-ranking creditors and did not get them, having regard to the size of the debt, the estimated value of the assets and efficiency. He remains a creditor with a voice at approval, per 2026 NSSC 195, para. 48.

Two preliminary matters resolved on consent: the stay was extended to September 18, 2026 (CFFI had asked for September 4), and the parties agreed the stay as it touches Cormorant is limited to insolvency defaults — those necessarily arising out of the CCAA proceeding — subject to leave to lift, per 2026 NSSC 195, para. 13.

The 539 paintings

The decision could have ended at approval. It does not, and the last four paragraphs are the reason to read it.

The monitor's third report notes that 539 pieces of artwork may be allocated to CFFI's main shareholder, John Risley, and that the allocation is still under discussion because certain information may be incomplete — including how and why these assets came to be recorded in CFFI's books, and how their provenance came to be, in the judge's phrase, "somehow controversial". Counsel for the monitor described it in oral submissions as a "grey area", per 2026 NSSC 195, para. 69.

Justice Keith is careful about proportion. The bulk of CFFI's value is in its equity positions; the artwork and any related party transactions are comparatively modest against the debt and the anticipated deficiency.

And then he declines to let that be the answer:

At the same time, these are assets whose value may not be in the tens of millions of dollars but is in the millions of dollars. I am not aware of any argument that these types of figures can be dismissed as immaterial — particularly here where many creditors face significant losses.

Perhaps more importantly, the integrity of the process generally should not be unduly compromised by unresolved concerns regarding valuable assets or related party transactions. My expectation is that the Court will receive a report with details regarding these assets and how these issues were resolved in the context of the upcoming SISP process. And, if they are not resolved, why.

Per 2026 NSSC 195, paras. 71–72.

The hearing was on June 9, the oral decision on June 12, the written reasons on June 15. In a case where the secured debt may exceed a billion dollars and the deficiency is certain, the supervising judge has told the parties he expects an accounting for several hundred paintings — resolved, or explained.