The plan of Nova Scotia seafood giant Clearwater Fine Foods to buy back the publicly-traded units in its income fund has been undone by the global financial crisis and the failure of an Icelandic bank.

Clearwater Seafoods Income Fund said Tuesday that the collapse of Glitnir Banki hf which was placed in receivership earlier this month, was the main reason the privatization was cancelled. Glitnir was to provide approximately 10 per cent of the financing required to complete the deal.

The parties involved said they have not been able to arrange alternative sources of the financing that was needed to complete the deal.

Clearwater Seafoods 3-month TSX chart

"The trustees [of the fund] are disappointed that this disruption of the financial markets did not allow the fund and the consortium partners to complete the transaction," said chairman Tom Traves.

"However, we remain confident in the business and its prospects for the long term. The trustees will continue to work with [Clearwater Fine Foods Inc.] to review alternatives to maximize value for the unit holders," Traves said.

John Risley, the president of Clearwater Find Foods, said the income fund will continue to be a long-term strategic investment for his company.

Units of Clearwater Seafoods closed down 21 cents, or 10.5 per cent, at $1.79 on the TSX.