August 12, 2011 / 12:11 PM / 6 years ago

UPDATE 3-Arctic Glacier sinks as future uncertain

* Q2 loss/shr $0.41 vs EPS $0.03 year-ago

* Q2 revenue $67.4 mln, down 6 pct

* Says in talks to secure longer-term refinancing solutions

* Fund’s units slump, touch record low

* Bankruptcy an option - analyst (Adds CEO comments from conf call, updates unit price movement)

By Gowri Jayakumar

BANGALORE, Aug 12 (Reuters) - Arctic Glacier Income Fund AG_u.TO warned that its future depended on the support of its lenders, as antitrust issues and bad weather pushed the packaged ice maker to a quarterly loss, sending its unit price to a record low.

“The fund’s ability to continue as a going concern is dependent upon successfully negotiating longer-term covenant relief with our lenders,” Chief Executive Keith McMahon said on a conference call.

The Winnipeg, Manitoba-based fund posted a second-quarter loss and said sales fell 6 percent to $67.4 million as it struggled with bad weather and rising competition. Better weather last month was favorable for packaged ice sales, it said.

“However, there is no assurance this will continue throughout our peak selling season or if it will be sufficient to resolve the covenant breach,” McMahon said.

The company, which had a working capital deficiency of $284.9 million at end-June, said its most pressing current issue was to continue active discussions with lenders to secure a longer-term refinancing solution.

“If they don’t do that, it’s hard to say what can happen. Bankruptcy is possible,” said Sam Yake, an analyst with BGB Securities.

Last month, Arctic, which was in breach of certain covenants under its credit facilities at end-June, said its lenders waived the need to comply with certain covenants until Sept. 1.

“They need to get a waiver on their term-loans ... they need to permanently fix that situation, and then the company should be okay. But it’s not clear if they can do that,” said Yake, one of the few analysts still covering the company.

Arctic, which also had to refinance C$90.6 million ($91.4 million) in convertible debentures before their end-July maturity, has this month issued 311.3 million units to debenture holders as it was unable to get an extension to the debentures.

“Although this has significantly reduced the fund’s debt burden, it has had a material adverse effect on the fund’s unit price,” McMahon said.

Arctic units, which have lost nearly all their value in the past four years, halved to a life low of 7.5 Canadian cents on Friday on the Toronto Stock Exchange.

The North American packaged ice industry has been under fire since 2007, when the U.S. government zeroed in on Reddy Ice , Arctic, and privately-owned Home City Ice, for an alleged conspiracy to eliminate smaller competition and keep retail prices higher than market levels.

Arctic had said it could proceed with its strategic review, which it began last September, once it had resolved most of its antitrust and litigation issues.

“Still ongoing are a number of state investigations to determine if state antitrust laws have been broken, although there has not been any movement in this for some time,” Arctic said in a statement.

The company posted a second-quarter loss of $16.1 million, or 41 cents a share, versus a year-earlier profit of $1.1 million, or 3 cents a share. (Reporting by Gowri Jayakumar in Bangalore, Editing by Ian Geoghegan)

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