Norshield Financial to sell investment management business to Aragon

Date: Friday, May 6, 2005
Author: ALLAN SWIFT

MONTREAL (CP) - Norshield Financial Group, facing a liquidity crisis with investors demanding money back from an underperforming hedge fund, has sold its investment management business, the company announced Friday.

Montreal-based Norshield said it has agreed to sell the subsidiary with their funds and investment clients to Aragon Investments Corp., although little information about that company was released.

"This transaction will allow me to return to my true passion, which is analyzing the capital markets and finding value within them for the benefit of our investors," Norshield chairman, founder and CEO John Xanthoudakis, said in a statement.

"Aragon brings a wealth of experience in the financial sector and this transaction is in the best interests of our investors."

Little information was available about Aragon, which Norshield said is based in Calgary. Its president is Ted Cantlon.

The Norshield release said "the principals of Aragon have over 30 years of experience in the areas of finance and investments. They have participated in numerous private equity transactions and have an excellent track record in providing value to all parties involved in their transactions."

Norshield vice-president Bertrand Goudreault said Xanthoudakis will become an employee of Aragon, as chief investment officer.

"He really wanted for a long time to get full-time on the investment side, so someone is coming in to take over the administrative side of the business," Goudreault said in an interview.

He added that the lawsuits involving film company Cinar will remain with Xanthoudakis and Norshield Financial Group.

Goudreault confirmed that Norshield has deferred redemptions from its $300-million Olympus Univest Ltd. hedge fund. Investors have tried to pull about a third of that amount from the fund, citing its poor performance.

"The money's not at risk, it's just that everybody wanted to go through the door at the same time," Goudreault said.

"We certainly don't expect anyone to lose a cent out of this."

Meanwhile, Industrial Alliance Insurance and Financial Services Inc. announced Friday that its clients may continue performing transactions with funds managed by Norshield despite the announcement Norshield was suspending redemptions on its core hedge fund products.

Norshield manages two segregated hedge funds for Industrial Alliance.

"We have no reason to believe that the capital invested in these funds is in any danger," said Yvon Charest, chief executive of the Quebec City-based insurance company.

The proposed transaction with Aragon is subject to regulatory approvals and the conclusion of a definitive agreement, but is expected to close by June 30.

Last week, Norshield announced it is seeking a total of $20 million in damages from Cinar and other defendants named in a pair of related law suits filed in Quebec's superior court.

All the suits revolve around placements of Cinar money in a Bahamian investment company.