Arctic Glacier Income Fund (CSNX:AG.UN) (the "Fund") has obtained creditor protection from the Manitoba Court of Queen's Bench to allow its subsidiaries to continue normal operations as the Fund seeks new investors.

The Arctic Glacier Income Fund is an unincorporated, open-end mutual fund trust. The Fund's head office is located in Winnipeg, Manitoba. Arctic Glacier's operating subsidiaries manufacture and distribute packaged ice products in Canada and United States.

They operate 39 production plants and 47 distribution facilities across six provinces in Canada and 23 states in the US, serving more than 75,000 retail locations. Most of the company's sales are to resellers such as supermarkets, mass merchants, convenience stores and gasoline outlets.

The court was told that the principal secured debt of the business consists of first lien debt of about C$7 million and US$23 million. Second lien debt of about C$58 million and US$152 million in non-revolving term loans is also outstanding.

In an affidavit supporting the Fund's application under the Companies' Creditors Arrangement Act (CCAA), Keith McMahon, president and CEO, said that Arctic Glacier was insolvent because it was unable to meet an accelerated payment demand from secured creditors who are owed an amount exceeding C$235 million.

Despite defaulting on its debt, McMahon said the company is viable, profitable in its operations, and generating strong cash flow. He said Arctic Glacier continues to be a leading North American manufacturer and distributor of packaged ice. McMahon told the court that the business holds the leading market position in Canada and in most of the markets it serves in the United States.

In 2010, Arctic Glacier had sales of C$233.5 million and operating profits of C$48.9 million. The business continues to generate operating profits and in the past has been able to make significant cash distributions to its unitholders, the court was told.

Since 2008 the business has been subjected to expensive antitrust litigation, poor weather conditions and increased financing costs. The effect of reduced sales volumes from unseasonably cool and wet spring weather in 2011 reduced demand for its products during a period when the business's marketing, debt servicing and litigation costs were rising.

The court order authorizes the Fund and its operating subsidiaries to begin a court-supervised recapitalization of the business through a sale and investment solicitation process. Arctic Glacier's current lenders have agreed to provide up to $50 million debtor-in-possession financing to fund its operations during the CCAA process.

In a news release, the Fund said it expects to maintain normal operations in both Canada and United States without layoffs or lease terminations. It said that suppliers of goods and services will be paid as usual, including for amounts owed prior to the CCAA filing.

Alvarez and Marsal Canada has been appointed monitor of the CCAA proceedings. TD Securities has been retained to conduct the sale and investor solicitation process which has been approved by the lenders.

The monitor has made an application to the United States Bankruptcy Court in Delaware for recognition of the CCAA proceedings under Chapter 15 of the US Bankruptcy Code in order to secure creditor protection in the United States.

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