A key IMAX Corp. investor is seeking appointment of an inspector, or information about the status of U.S. and Canadian investigations of the theater owner, under a provision in Canadian corporate law that gives holders rights when a company delays filing restatements of prior results.
Private equity fund Catalyst Fund Limited Partnership II, which owns notes and stock in IMAX, said it filed an application in Ontario Superior Court under what are called the oppression remedy provisions of the Canada Business Corporations Act.
The investor said the suit stems from company plans for a restatement of IMAX’s financial statements, from certain debt defaults, from complaints about the content and accuracy of IMAX’s public statements and regulatory filings, and from concerns relating to a lack of both internal financial controls and a remediation plan at IMAX.
Catalyst’s application seeks either the appointment of an inspector, or an order for IMAX to produce all relevant documentation regarding the current state of Securities and Exchange Commission and Ontario Securities Commission inquiries, the status of the company’s restatement, information regarding the nature and timing of the financial controls remediation plan, and details regarding transactions that put IMAX in default of certain debt covenants or the related parties transaction provisions of the indenture.
A court date is set for this Thursday.
The Globe and Mail newspaper in Toronto pointed out that Catalyst in April said it was seeking support from other bondholders to oppose IMAX’s request for a waiver on its debt covenants. The company has already missed several deadlines for filing its 2006 annual report and restating its financials for the past six years.
In March, the company warned
that it would delay filing its financial statements due to the discovery of accounting errors, and a broadened review that included accounting matters reflected in Securities and Exchange Commission and the Ontario Securities Commission comments to the company.
IMAX said at the time that it had obtained a waiver under its bank credit agreement of the covenant to deliver its audited financial statements until June 30. It wound up missing that June 30 deadline, however, and also missed a subsequent July 31 deadline.