2008-09-16 03:39:03 -

- The Official Committee of Unsecured Creditors of CFM U.S. Corporation announced today that it has filed a complaint against the Ontario Teachers Pension Plan Board (Teachers). The complaint seeks to avoid over US$300 million in claims asserted by Teachers arising out of its failed investments in Canadian fireplace manufacturer CFM Corp.

CFM Corp. and CFM U.S. Corporation, one

of its American subsidiaries, are the subject of insolvency proceedings in Canada and the United States. The Committee was appointed by the Office of the United States Trustee in April 2008 to represent the interests of unsecured creditors of CFM U.S. Corporation, including the Sheet Metal Workers' National Pension Fund. Teachers manages the largest single-profession pension plan in Canada.

According to the complaint, filed on September 12 in the U.S. Bankruptcy Court for the District of Delaware, Teachers acquired 99% of the equity interests in CFM Corp. in 2005 with an initial investment of more than US$179 million. By the time of the bankruptcy filings three years later, Teachers' investment in CFM had almost doubled.

The complaint alleges that the US$300 million in secured claims now asserted by Teachers should be treated as equity investments and subordinated to the claims of CFM U.S. Corporation's unsecured creditors. The complaint further alleges that Teachers misled trade creditors of CFM U.S. Corporation by issuing press releases and sending letters to trade creditors and suppliers indicating that CFM "emerged as a financially sound business" as a result of the acquisition, when in fact Teachers' alleged secured debt rendered CFM insolvent. In addition, the complaint seeks to avoid as fraudulent transfers the guaranties and security interests granted by CFM U.S. Corporation to Teachers.

Most of the assets of CFM have been sold through the bankruptcy proceedings, leaving Teachers and the Committee to fight over competing claims to less than $25 million of net sale proceeds expected to be available for distribution.

In a related filing with the Bankruptcy Court, the Committee is also objecting to CFM U.S. Corporation's recent motion to destroy certain of its own books and records. In its opposition, the Committee describes the motion as a calculated attempt to destroy evidence relevant to the Committee's complaint against Teachers.

Blattel Communications
Kristy Werness, 323-944-0817
Kristy@blattel.com
Jen Klein, 323-944-0816
Jen@blattel.com