Investors who loaned money to two failed companies are suing Winnipeg's Astra Credit Union for more than $5.8 million, alleging it was negligent in letting the companies grossly exceed their credit limits.

In a statement of claim filed Tuesday in the Manitoba Court of Queen's Bench, the investors allege that Astra's senior management knew or should have known about the mishandling of the accounts.

The investors are made up of both companies and individuals, including retired Winnipeg Jets captain Thomas Steen and two local doctors.

They had invested a total of $3.8 million in Maple Leaf Distilleries and Protos International, a holding company that was the majority shareholder of Maple Leaf.

Both companies collapsed early in 2006 with significant debts, following claims they defaulted on millions of dollars in loans to hundreds of Manitoba creditors.

It became public that Astra, as a major lender, had allowed the two companies to significantly exceed their credit limits. After an internal investigation, Astra fired one of its employees and sold off the distillery's assets.

There is some money left from the sale.

In the lawsuit, the investors say Astra should forfeit its right to that money, accusing it of negligence in handling the lines of credit.

They're seeking to recoup their $3.8 million in investments as well as an additional $2 million in punitive damages.

None of the allegations in the lawsuit have been proven in court. The credit union has yet to file a statement of defence.

Suit comes amid merger attempt

Astra Credit Union CEO Ian Dark told CBC News on Tuesday there is no legal foundation for the claim and the credit union will vigorously defend the action.

However, the lawsuit came just as Astra and two other credit unions will vote on a merger proposal that, if approved, could create the tenth largest credit union in Canada.

More than 100,000 members of Astra, Vantis and Assiniboine credit unions are expected to vote on the merger proposal on Wednesday.

The CEO of Assiniboine Credit Union said Tuesday that he still believes in the merger, and will recommend his members ratify it.