SeaFort Capital backed Distinct Infrastructure placed into receivership

Distinct Infrastructure Group Inc. (DIG) (TSX-V: DUG) has been placed into receivership. Deloitte Restructuring Inc. is acting as receiver and manager. The company’s independent directors have resigned.

RBC Royal Bank of Canada, the secured lender, is expected to suffer losses on its debt position. Advances made by RBC under a credit agreement are approximately $52.7 million, of which $18.4 million is in respect of a term loan with the balance, or approximately $34.3 million, representing a revolving credit facility

The subordinated lender and shareholders are not expected to see any recovery. Rogers Financial Management Corporation, a major unsecured debenture holder, was owed $9.1 million as of December 31, 2018.

Distinct appointed John Nashmi as its new CFO on January 14, 2019 and subsequently terminated the employment of William Nurnberger, Interim CFO & VP of Finance, effective February 11, 2019.

On February 18, 2019, Joe Lanni and Alex Agius, Distinct’s co-CEOs, were terminated as employees as a result of the reported overstatement of accounts receivable and work in process (WIP) and expense account irregularities. Lanni and Agius, through legal counsel, have denied any allegations of impropriety and remain directors of the company.

In November 2017, Distinct completed a brokered financing of 7,614,000 common shares at $1.35 per share for gross proceeds of $10,278,900. As part of the financing, SeaFort Capital subscribed for 6,800,000 shares, representing 14.8% of outstanding shares, for an investment of $9,180,000. SeaFort Capital became the third largest shareholder slightly behind the co-CEOs.

Distinct had previously raised $20 million in term loan acquisition financing from Crown Capital Fund IV, LP in November 2015. In May 2017, the loan was repaid in full with a portion of proceeds of RBC debt facility.

Toronto based Distinct is a utility and telecom infrastructure contractor operating in the Greater Toronto Area and Winnipeg. It currently employs approximately 310 employees.

Major customers include Bell, Rogers, Toronto Hydro and Beanfield Technologies. Bell and Rogers together represent in excess of 56% of DIG’s reported revenue for the first 11 months of 2018, although the company’s financial reports have proven to be unreliable, said Deloitte in the receivership filing.

photo credit: DIG

News Release

DISTINCT INFRASTRUCTURE GROUP INC. HAS BEEN PLACED INTO RECEIVERSHIP

TSXV: DUG
March 11, 2019 – Toronto, Ontario – Distinct Infrastructure Group Inc. (“Distinct” or the “Company”) announced that the Ontario Superior Court of Justice (Commercial List) has issued an order placing the Company (and several of its wholly owned subsidiaries) into receivership with the cooperation of the Special Committee.

Deloitte Restructuring Inc. is acting as receiver and manager. The company’s independent directors have resigned. At this time, the secured bank lender is expected to suffer losses on its debt position. The subordinated lender and shareholders are not expected to see any recovery. Material filed in connection with the receivership will be posted to the receiver’s website at www.insolvencies.deloitte.ca/en-ca/dig.

For further information please contact:
John Nashmi
Chief Financial Officer
Distinct Infrastructure Group
Email: john.nashmi@diginc.ca

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

Ted Liu

Ted Liu, M.Sc. (Mining, Queen's), MBA (Finance, Toronto), is the Editor of Private Capital Journal, CanadaMetals.ca, TechWire.ca, and the former Editor of Canadian Private Equity. Ted has been passionately tracking Canadian private capital industry since 1992, having most recently served as Research Director for The Canadian Venture Capital and Private Equity Association (CVCA).

Ted is the architect of CVCA infobase, and is the architect of CPE Media's Financings.ca, Canada's most sophisticated and advanced all private capital and public market financing database.