Cortland Credit Group Inc., a Toronto-based private lender, has halted redemptions from its flagship private debt fund, citing trouble with a single borrower that comprises a large portion of its loan portfolio.
In a memo to clients Cortland said that it has an “overweight single name concentration” in its fund, Cortland Credit Strategies LP, and that it is working to rebalance its portfolio. However, doing so depends on market conditions and the process is taking longer than expected.
Cortland, which had $1.2-billion in assets under management in 2024, did not name the borrower, but it said suspending investor redemptions “will facilitate the necessary rectification of the overweight single name exposure, rebalance the portfolio accordingly and preserve the value of the portfolio of all investors.”
Private debt funds are alternative lenders and their borrowers are often higher-risk companies that can’t access credit from traditional financial institutions. To compensate for this risk, private debt funds typically charge interest rates above 10 per cent annually.
In Canada, these funds tend to raise money for their loans from individual investors, and the funds grew popular in the aftermath of the 2008-09 global financial crisis by marketing themselves as being similar to bonds, yet targeting 8- to 10-per-cent annual returns. These yields were much higher than those offered by guaranteed investment certificates and government bonds.
Since interest rates started rising in 2022, however, a number of private lenders have run into trouble. Some of their borrowers have buckled under the weight of higher annual interest costs, and a growing number of investors have wanted to cash out because they can now find higher returns elsewhere. The S&P/TSX Composite Index has posted an 18-per-cent average annual return over the past three years.
The difficulty for fund managers is that their loans are illiquid and can’t be sold in a flash. For this reason, the funds have limits on how much investors can redeem each quarter, often around 5 per cent of total assets. Over the past three years, redemption requests have exceeded these limits at multiple Canadian funds, and the rush to exit has been so strong that the funds have had to halt or limit redemptions.
One characteristic of these funds that has spooked investors is the limited disclosure when it comes to loan portfolios. Fund managers have long argued they can’t disclose much because of confidentiality agreements. For investors, that wasn’t as much of a problem in good markets, but now that the economy is volatile, they struggle to assess the risk.
In early 2024, Independent Energy Corp. (IEC), which owns a diesel fuel refinery in Saskatchewan, was the largest borrower in Cortland’s private debt fund, owing $229-million. IEC defaulted on its loan and filed for creditor protection, but Cortland’s investors had little way of knowing about the default when reading the fund’s two-page quarterly summary.
IEC also wasn’t named in the quarterly summary, and its debt was split into three separate buckets in a table of Cortland’s top 10 loans, leaving investors to think IEC’s three loans could be unrelated. In reality, they were all made to the same company – and one was a financing Cortland provided to help IEC keep the lights on during creditor protection proceedings.
More recently, a related borrower, Independent Renewable Resources Corp. (IRCC), was put in receivership. IRCC owns the Echo Refinery in southwest Saskatchewan, which utilizes used motor oil feedstock to produce refined petroleum products, and has had financial troubles since 2022 when it defaulted on its loan from Cortland.
The lender has worked with the company to keep it afloat, but by October, 2025, IRCC owed $68-million and Cortland asked the courts to appoint a receiver.
IRCC is run by Bryce Karl, the founder and chief executive officer of IEC, which owned the other Saskatchewan refinery in Cortland’s portfolio.
Cortland did not return a request for comment for this story.