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IN& CANADA BUSINESS CORPORATIONSACT CREDIT BIDDING PICKING A PRO
Mlfortunafavetforti but
November 2012Special Edition
Editor-in-Chief:Jean Gumming
Project Editor:Gina Fusco
Product Process Lead:Jill Grove
Managing Editor:Tim Wilbur
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Cover Photography:Neil Ta
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This Lexpert Insert is publishedtwo to four times a year by
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4I
GUIDANCE THROUGHUNPREDICTABILITYBY JEAN GUMMING
6 WHO GETSPAID FIRST?BY SANDRA RUBIN
A SIMPLERALTERNATIVEBY SHELDON GORDON
16 GAMINGTHE SYSTEMBY SANDRA RUBIN
2P WHICH PROVINCESHOULD YOU FILE IN?BY KEVIN MARRON
SPECIAL EDITION
iLEXPERT: EDITORIAL
i
GUIDANCE THROUGHUNPREDICTABILITY
IN THE ARTICLES WITHIN this special edi-tion, Lexpert brings you explanation and contexton proceedings your company may be facing orcontemplating. Whether a company ends up inproceedings under the Companies'reditors Ar-rangement Act (CCAA) or the Canada IfusinessCorporations Act (CBCA), its executive officers
may well be facing this sector of the Canadian le-
gal system for the first time. The Lexpert-rankedlawyers listed in this special edition can be ofsignificant and reassuring counsel on navigatingthrough, or contemplating, rhese statutory scenar-ios. In some cases, these lawyers have contributedto the drafting and/or amending of these statutes.They wrote the law, in other words. More specifi-cally, you may be in a global company in which youneed guidance as to the ways in which the Cana-dian insolvency and restructuring regime difFersfrom those in other countries in which your com-
pany also operates.These lawyers can do more than provide pro-
cess, jurisdictional and technical advice, however.They can be ofcounsel in the larger context ofeco-nomic uncertainty. Negotiation is obviously a keyelement in any restructuring, yet all the more so
when lenders are nervous, opportunities are liter-
ally all over the map and customers are holding ontight. Restructuring can in many cases still be agrowth strategy, but overall, the level ofunpredict-ability out there is staggering. And yet, continu-ing the status quo may not be an option for yourbusiness. So you have to move forward. As you do,who are you going to trust to negotiate for yourcompany? To guide you as you make choices?
'Ihese Lexpert-ranked lawyers are voted in bytheir peers as those whom they would recommend(presuming they couldn't take on the mandatethemselves). Knowing that clients are going toread and use these Lexpert rankings, lawyer vot-ers are ethically bound to vote for peers they trust.That, we suggest at Lexpert, is a good basis to be-
gin negotiations on your behalf. We hope you'lread and note their biographical information.
Jean Cumming
Editor-in-Chief
LEXPERT RANKED LAWYERS
Abitan, SandraOsleo Hoskin
& Harcourt LLP
(514) [email protected]
Ms. Abitan practises insolvencyand restructuring law including
reorgamzations and recapital-izations. Her clients mclude
public and pnvate debtors,boards, fmancial institutions,
private-equity sponsors andstrategic purchasers.
Anderson, A. RobertOsier, Hoskin
& Harcourt LLP
(403) [email protected]
Mr. Anderson's practicemcludes a focus on domestic,cross-border and international
restructuring and insolvency
law, mcluding litigation, loan
recoveries and foreclosures.His clients include creditors,receivers, trustees and
purchasers.
Barnes, LyndonOsier, Hoskin
& Harcourt LLP
(416) 862-6679Ibarneslosler.corn
Mr. Barness expenenceincludes acting m the Toronto
Skydome, Eaton's, Bramalea,
Cadillac Fairview, PSINet, AT&7
Canada, Air Canada, Stelco, GM,
Canwest and Nortel matters.
His clients include govern-
ments, debtor corporations and
creditors.
Barrack, Michael E.Thornton Grout
Finnigan LLP
(416) [email protected]
Mr. Barrack is recognized asa litigator who has earned theconfidence of many national
and international clients. A
competitor noted in a recent
survey, "He's as good as it getsfirst-rate counsel, among thetop five in Canada."
Belanger, Philippe H.McCarthy Tetraulf LLP
(514) 397-4203pbelangeromccarthy.ca
Mr. Belangers practice focuseson insolvency/restructuring He
has given many conferences,published insolvency and
creditors'ights texts, and beenretamed by government on
insolvency amendments. Co-
wrote a book about Insolvency
Reform, 2010.
Bieganek, QC, Darren R.Duncan & Craig LLP
(780) [email protected]
Mr. Bieganek's insolvency and
restructuring htigation practiceengages debtor restructurings
under the Bankruptcy andInsolvency Act and Companies
Creditors Arrangement Act,
creditor remedies and priority
issues. He lectured to the BAC,
is a regular author and speaker,and a member of the TMA. He
appears m all Alberta courts
and the FCC.
4 wwwiexpert,ca
INDALEX
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Critics feared the Indalex rulinghad undermined the accepted priorityfor repaying funds in a restructuring.With Timmfnco, many of theseconcerns have been defusedby Sandra Rubin
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LEXPERT RANKED LAWYERS
Bomhof, ScottTorys LLP
(416) 865-7370sbomhoftNtorys.corn
Mr. Bomhof's practice focuseson restructurings, insolvency,
including work-outs, refmanc-
ings, DIP lending, receiverships,
distressed M&A, bankruptcies,
lender liability, enforcementof security and rights between
debtors and creditors.
Boucher, Bernard8(ake, Casse/s(t Graydon LLP
(514) 982-4006bernard.boucheOblakes.corn
Mr. Boucher's litigation practice
embraces restructuring and
insolvency transactions. His
clients include financial institu-
tions and monitors. He appears
on tnals and on appeals both
before the QCA and the SCC.
He is a frequent author and
speaker.
Bish, DavidTorys LLP
(416) [email protected]
Mr. Bish assists chents in
resolving complex matters
involving all aspects ofbankruptcy, proposals, windups,
liquidations, reorgamzations,
restructurings, receivershipsand security enforcement.
Byers, David R.Stikeman E((iott LLP
(416) [email protected]
Mr. Byers heads the Toronto
Litigation Group. His practiceincludes insolvency and
restructuring matters. He is
a member of the Insolvency
institute of Canada, the Litiga
tion Counsel ofAmenca andis a former director of The
Advocates'ociety.
Carfagnini, JayGoodmans LLP
(416) 597-4107/[email protected]
Mr. Carfagnim's practicefocuses on corporate reorga-
nizations with an expertise in
cross-border and interna-
tional transactions involving
the US and UK. He has been an
advisor in most recent ma/or
Canadian restructurings includ-
ing Nortel, MF Global Canada,
LightSquared and Chemtura.
Chadwick, Robert J.Goodmans LLP
(416) [email protected]
Mr. Chadwick's corporatepractice focuses on national,
cross border and international
restructuring and insolvency
law. He represents a diverse
group of clients, and is an
advisor to various companies,boards creditors adhoccreditors'ommittees and
private-equity parties.
6 www.iexpert ca
al,
mal
ye
es,
Chai(on, Harvey G.Chal tons LLP
(416) [email protected]
Mr. Chaiton practises in theareas of bankruptcy and
insolvency with particular
emphasis on domestic and
cross-border receiverships
and corporate restructurings,
mcluding insolvency litigation.
He has appeared before all lev-
els of court in Ontario and the
Supreme Court of Canada to
argue cases on diverse issues
arising in insolvency matters.
Cohen, David FW.Gowflng Lafleur
Henderson LLP
(416) 369-6667david.coheniwgowlings.corn
Mr. Cohen's domestic and
cross-border restructuring,
msolvency and distressed M&A
practice includes experience
in the automotive, aviation,
construction, financial services,
healthcare, hospitality, mming
and resource, and retail
sectors.
Chow, NillyBlake, CasselsI Graydon LLP
(416) 863-2594milly.chowoblakes.corn
Ms. Chow specializes in
domestic and cross-border
restructurings, both in and out
of court, and in distressed M&A.
She provides advice to debtors,purchasers, lender syndicates,
creditors, monitors, receivers
and other stakeholders.
Collins, Sean F.
McCarthy Tetrauft LLP
(403) 260-3531scollinsomccarthy.ca
Mr. Collins appears on local,national and cross-bordermandates on behalf of financial
mstitutions, debtors and
court officers across a broadspectrum of industries with
a particular focus on energy,power and mining. He is anHC member.
Cooper, George LCox & Palmer
(506) 863-0793gcooperocoxandpalmer.corri
Mr. Cooper's practice includes
an emphasis on bankruptcy
and insolvency. He representschartered banks, insolvency
professionals, debtors and
others. He regularly appearsbefore the courts and various
administrative tribunals.
Dacks, JeremyOsier, Hoskln
Er Harcourt LLP
(416) 862-4923jdacksoosler.corn
Mr. Oacks specializes in com-
plex domestic and cross-border
insolvency and restructuring
litigation. He represents
debtors, monitors, receivers,
trustees and purchasers of
distressed assets before courts
throughout Canada.
www lexpert ca 7
INSOLVENCY & RESTRUCTURING
COURTS OVERSEEING THE restructuring of a distressed Ca-nadian company can be confronted by wrenchingly difficult deci-sions. Where money is tight, as it always is in these situations, per-
haps none is more fraught than determining who is first in line forrepayment with money available from either current operations orasset sales.
Should it be the lenders who put up the short-term emergen-
cy cash to keep the company afloat while it's being restructured—and who demand they get paid back first as a condition ofadvancing the money? Or should it go to underfunded pensionplans that have thousands of pensioners counting on them fortheir retirement?
"BYTHE WAY, IT'S NOT JUST PENSIONERSWHO COMPLAIN ABOUT THE SUPER-PRIORITYCHARGE. THE BANKS DO AS WELL BECAUSETHERE ARE ALL SORTS OF THINGS THAT
COME IN AHEAD OF THEM."
lti Canada, the common wisdom has been emergency lenders have
priority. But a decision called Re Indalex Limited galvanized the re-
structuring community by appearing to throw that into question.It started when the lower court judge granted super priority to
the lenders under the federal Companies'reditors Arrangement
Act, but the Ontario Court of Appeal reversed the decision andheld the pension plan had priority.
Insolvency and restructuring lawyers were agog. Ihere were pre-dictions that banks and funds that specialize in Debtor-in-Posses-
sion, or DIP financing, would no longer make these loans in Canadaif paying them back was bumped down the food chain. 'Ihe Court
'gr/~~~'f
Appeal ruling quickly went up to the Supreme Court ofCanada.But earlier this year, even as everyone was still waiting for In-
daiex, a ruling issued by the Ontario Superior Court ofJustice in
Re Timminco Ltd. et al. efFectively made the top court's eventual
decision on the question far less relevant.
lhe circumstances were essentially the same as in Indalex. The
company was under court protection and DIP lenders were askingfor super-priority status for their charge. Two unions opposed it,arguing, among other things, that priority belongs to the under-
funded pension plans.Justice Geoffrey Morawetz ruled that DIP lenders were in fact at
the front of the line —and he applied the Court of Appeal's own
reasoning in Indalex in making his finding.
Restructuring is covered by a federal statute, while pension and
employment matters are provincial. %he justices had said thatwhere there is a conflict between federal and provincial statutes,
and a proper analysis of the doctrine of paramountcy has beencarried out, the federal statute generally triumphs. In ruling forpensioners in Indalex, it found, among other things, the requisiteanalysis had not been done.
Timminco had no similar omission."Justice Morawetz says in Tirzzmi neo that Indalex laid a road map
for granting priority to administration charges and DIP financing,and the supervising judge absolutely has the jurisdiction to grantpriority to those charges," says Sean Collins, head of the McCarthyTetrault LLP bankruptcy Bc restructuring group in Calgary. "Whatthat means is reports of the demise ofrestructuring in Canada were
greatly exaggerated."There's no question, when Timminco was released, many in the
LEXPERT RANKED lAWYERS
Desrosiers, MartinOsier, Hoskin
8 Harcourt LLP
(514) 904-5469mdesrosiersi9osler.corn
Douglas, Donald G.Thompson Dorfman
Sweatman LLP
(204) [email protected]
Holding an LLM (Osgoode) in
ADR, Mr. Douglas's preferred
first recourse is negotiation and
mediation. His wide-ranging
commercial practice includes
transactional and litigious
matters, with emphasis on
insolvency and restructuring,
Mr. Desrosiers's special-ties include insolvency and
restructuring law. He represents
financial institutions, trustees,receivers, debtors and
creditors'ommittees. He has
lectured and written extenswely
and is an IIC member.
DeMarinis, Tony
Torys LLP
(416) [email protected]
Mr. DeMannis is the headofTorys LLP's Restructuring
and Insolvency Practice in
Canada. He has been involved
in many of Canada's largestrestructurings, recapitalaations,distressed investments andCCAA proceedings over the lasttwo decades.
Dow, J. Michael J.Fillmore Riley LLP
(204) [email protected]
Mr. Dow's practice includes
a focus on bankruptcy and
insolvency htigation, pension
plans and commercial lending.
He has spoken on various
topics for both the Law Societyof Manitoba and the Manitoba
Insolvency Association.
Dowdall, Dan R.Fraser Mi incrCasgrain LLP
(416) [email protected]
Mr. Dowdall's insolvency,
bankruptcy and restructuring
practice embracescreditors'emedies,
debtors'elief,receivership, and bank and
insolvency-related litigation.
His clients include companies,
trustees, secured creditors
and monitors.
Duchesne, MatcBorden LadnerGervais LLP
(514) [email protected]
Mr. Duchesne's msolvency
practice focuses on advising
financial institutions, credi-
tors, receivers, monitors and
trustees, and representmg their
mterests m court on secunty,
bankruptcy, turnaround and
asset recovery matters.
8 wwwuexpert.ca
INSOLVENCY & RESTRUCTURING
restructuring Bar breathed a collective sigh of relief.It's not just DIP financing that can be granted super priority over
pension plans. Justice Morawetz makes it clear that charges to payrestructuring lawyers and the monitor, to cover the indemnifica-tion of directors and officers, and to keep paying senior employ-ees key to the restructuring can be sent to the front of the line as
well, says Robert Thornton, a foundingpartner at Thornton GroutFinnigan LLP.
"The people who are making the restructuring happen —theDIP lenders, the lawyers and monitor providing services, the of-ficers and directors who are making decisions and putting them-
"BANKS AND UNIONS ARE OFTEN NOT
PREPARED TO ADVANCE THE EMERGENCYSHORT-TERM FUNDS TO KEEPCOMPANIES OPERATING. DIP LENDERSNEED CERTAINTY."
selves at risk —are all part of the restructuring," says 'Ihornton."Justice Morawetz says it would be unfair to expect those peopleto contribute their services if they might not be paid.
"By the way, it's not just pensioners who complain about the su-
per-priority charge. The banks do as well because there are all sortsof things that come in ahead of them."
But Thornton is convinced Justice Morawetz got it right and
says if Timminco had gone the other way, "we'd be liquidating com-
panies instead of restructuring them."It's the right outcome, the practical outcome, and the right
thing to do. The worst thing that can happen to a pensioner is forthe company to go bankrupt because then there's no possibility
of further contributions to the pension plan. Everybody benefitswhen a company is restructured."
Jay Carfagnini, who heads the corporate restructuring group atGoodmans LLP, says Timminco is going to put pressure on judgeswho supervise CCAA proceedings to complete a sophisticatedanalysis very quicldy.
"There will be tremendous pressure on the judges in a CCAAcase to go through all of the records and all of the arguments on a'real-time'asis and make those determinations on an urgent basis,"
says Carfagnini. "Ifyou took the time that it would normally take,
you won't have to worry about it because the company will be deadbecause one thing is clear: ifyou don't pay people they don't usually
come to work, and if you don't pay suppliers, they don't continueto supply.
"So this decision puts enormous pressure on the court, in a hur-
ry-up real-time basis, to make several findings to support the deci-sion that he or she is rendering to provide the super priority and getit in place. 'Ihis is an important issue, Banks and unions are oftennot prepared to advance the emergency short-term funds to keepcompanies operating. DIP lenders need certainty."
Collins of McCarthy Tetrault believes it's a mistake to see itas pensioners versus corporate lenders. He says Justice Morawetzmakes it clear their fates are intertwined.
"He says the alternative here is the pensioners get nothing. Thealternative is a liquidation in bankruptcy, and there the priority is
clear —and the priority is secured lenders."So you'e either got a restructuring and the opportunity to
maximize the return for all stakeholders including pensioners, orit's a pure meltdown where they get nothing. Given those two alter-
natives, the pensioners have to come along for the ride."
Sandra Rubin is a freelance legal affairs writer.
LEXPERT RANKED LAWYERS
Empey, BrianQoodmans LLP
(416) 597-4194bempeyregoodmans.ca
Mr. Empey's practice focuseson national, cross-border and
international insolvency and
restructunng matters, creditorremedies and structured
financing. He has expertise in
complex CCAA cases and insol-
vencies of fmancial institutions
and securities firms.
Emslie, Colin M.Fraser Mi incrCasgrain LLP
(604) 622-5160colin.emslieNfmc-law.corn
Ferland, DenisDavies Ward Phillips
Tyr Ihneberg LLP
(514) [email protected]
Mr. Emslie's practice includes asigmficant focus on insolvency
matters including receiverships,
bankruptmes, restructurings
and work-outs. He has lectured
frequently on a vanety ofinsolvency topics, and is aCAIRP and INSOL member.
Mr. Ferland practises
insolvency and restructuring
law, representing fmancial
institutions, creditors, debtors,
trustees, momtors, receivers
and multinationals on complex
reorganizations, assets sales/purchases, refinancing and
related litigation.
Ferris, Heather M.B.Lawson Lundell LLP
(604) 631-9145hferrisolawsonlundell.corn
Ms. Ferris's practice focuses
on insolvency law, mcluding
large-scale work-outs and re.
structurings. Her clients mclude
corporations, institutional
lenders, trustees and receivers.
She is vice-chair of the CBA's
National Insolvency Section.
Fishman, Avram
Fishman Flanz Meland
Paquin LLP
(514) 932-4100 Ext. [email protected]
Mr. Fishman is renowned for
his legal creativity and ability
to resolve the most challengmg
cases. His firm was ranked
among the top boutique firms
in Canada and he has been
involved in many files of major
national and international
importance.
Fontaine, Jean C.Stikeman Elliott LLP
(514) 397-3337jfontaineostikeman.corn
Mr. Fontaine is head of the
Montreal Litigation and Insol-
vency & Restructuring Groups.
He acts for public companies,
court-appointed monitors,
trustees and creditors. Member
ofthe IIC. Recogmzed by The
Best Lawyersin Canada 2012.
1Q www iexpertca
CANADA BUSINESS CORPORATIONS ACTi
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Forte, Mario J.Norton Rose Canada LLP(416) [email protected]
Fortin, Ad. E.,Jean-YvesDavis LLP
(514) 392-8433jyfortiniidavis.ca
Mr. Fortin, past president
and fellow of IIC, former CIF
director, III founding member,
and ACB fellow, advises on
reorganizations, bankruptcies,
receiverships and work-outs;
involved in most major
Canadian insolvencies in the
past 35 years.
Mr. Forte s domestic andcross-border practice includesformal restructurings, informalwork-outs, receiverships andbankruptcies in the technology,communications, financialinstitutions, retailmg, manu-factming and natural resourcesectors.
Gage, James 0.McCarthy Tetrault LLP
(416) [email protected]
Mr. Gage advises creditors,
debtors and court officers in
CCAA and other restructur-
ing cases and in work-out,
bankruptcy and receivership
proceedmgs. His mandates
have included the Nortei,
Chrysler and Stelco restructur-
ings.
Goldstein, (TheHonourable) YoineMcMillan LLP
(514) 987-5027yoine goldstein@mcmillanca
Senator Goldstein practisesinsolvency law, in which he
has published and lectured
extensively. He was chair of theFederal Personal Insolvency
Task Force and is the only
Canadian who is both an
ACTL and American College
of Bankruptcy Fellow.
GoHck, StevenOsier, Hoskin
& Harcourt LLP
(416) 862-6704sgolickteosler.corn
Mr. Golick's practice embraces
bankruptcy, insolvency, debtor/creditor matters, secured
transactions, work-outs and
restructurings. He advises
fmanmal institutions, trustees,receivers, secured and
unsecured creditors, debtors
and purchasers.
Gottlieb, Matthevv P.
Lax O'ullivan Scott Lisus
LLP
(416) 644-5353mgottlieblcounsel-toronto.corn
Mr. Gottlieb is an experienced
commercial litigator with
significant expertise in restruc-
turing and insolvency matters.
He regularly appears before
a variety of courts throughout
Canada, and represents
creditors, financial institutions,
court officers and debtors.
www.lexpert.ca
INSOLVENCY ec RESTRUCTURING
The Companies'reditors Arrangement Act (CCAA) is theusual legislation under which insolvent companies with $5 mil-
lion or more in outstanding debts are restructured. In recent years,
however, in order to save time and expense, some large companieshave filed plans of arrangement pursuant to the Canada business
CorporationsAct (CBCA) rather than the CCAA.Not all large-company restructurings though can be done un-
der the CBCA. 'Ihe most obvious exceptions are corporationsthat have been incorporated under provincial corporation statutes
rather than the CBCA. Until recently, the CBCA was confinedto dealing with shareholders'quity —the cancelling of shares, the
issuing of shares in exchange for debt —rather than the restructur-
ing ofdebt.
"IFTHE COMPANY HAS A
COMPLICATED CREDITOR STRUCTURE,IF YOU HAVE CREDITORS WHO ARE
NOT SUPPORTIVE, THEN THE CBCAIS NOT THE RIGHT STATUTE."
"Under the CCAA," says Michael Rotsztain, a partner at TorysLLP in Toronto, "ifyou'e doing a plan of arrangement with yourcreditors, you can basically deal with all types of debts that youowe. You can generally do a comprehensive cleaning up ofyour bal-
ance sheet. 'Ihe CBCA is much more limited."
The CBCA can be used only for dealing with financial indebt-
edness such as bonds, debentures and commercial notes. "Often
companies restructure because they have some huge and onerous
financial obligation —such as a supply contract or a long-term lease—and they want to repudiate the contract," says Rotsztain. "You
can't do that with the CBCA."'Ihe statute is also not sufficient for a reorganization if the com-
pany has large debts to the government (taxes) or employees (wagesand benefits). Even conventional bank debt is iffy. "It's question-able whether bank debt can be the subject of an arrangement"
under the CBCA, says Pamela Huff; restrucruring and insolvency
group leader at Blake, Cassels Ljc Graydon LLP in Toronto. "'Ihere
has been precedent for that where there was no objection, but it
might not work if the court was actually asked" to rule on it.In addition, th- CBCA, on its face, appears to exclude insolvent
companies. Section 192(3) states that "a corporation that is not in-
solvent" may make an application under the CBCA. Ibis suggeststhat a corporation that is insolvent may not.
Nevertheless, this stipulation has been held to be satisfied if atleast one applicant company is solvent —even if the applicant is a
Griffin, PeterLenczner Slaght RoyceSmith Griffin LLP
(416) 865-2921p
Mr. Griffm is recognized by
his peers as one of the toplitigators in Canada. He
has extensive experience m
complex cross-border litigation,
especially as it relates to classproceedings and msolvency
and restructuring. He is Presi-
dent of the Advocates'ocietyand Fellow of the ACTL.
Grieve, John R
Fasken Marfineau
DuMoulin LLP
(604) [email protected]
Mr. Grieve, who chairs Fasken's
Insolvency and Restructuring
Group, practises stnctly m thearea of complex commercial
reorgamzations. He acts fordebtors, creditors, receivers,and monitors, and is a memberofthe IIC,TMA,ABI and INSOL
Grout, James H.Thornton Grout
Finnigan LLP
(416) [email protected]
Mr. Grout, an IIC member,
practises insolvency and
restructuring, including htiga-
tion. His chents include banks,
asset-based lenders, mvest-
ment funds, monitors, trustees
and regulators. His experience
extends to the auto, insurance,
securities, pensions and
mining sectors.
Grundy, Susan M.Blake, Cassels& Graydon LLP
(416) 863-2572susan grundy@blakes corn
Ms Grundy's insolvency
practice emphasizes work-outs,
debt restructurings and M&A
transactions involvmg busi-
nesses in finanmal difficulty for
debtors and creditors m both
domestic and cross-bordercases.
Huff, Pameia LJ.Blake, Cassels& Graydon LLP
(416) 863-2958pamela.huffOblakes.corn
Ms. Huff's practice includes
domestic and cross-border
litigation and commercial
aspects of work-outs, reorga-
mzations, receiverships and
other security enforcement. Her
clients include debtors, lenders,
receivers, momtors and other
stakeholders.
Jackson, David R.M.Taylor McCaffrey LLP
(204) [email protected]
Mr. Jackson leads thefirm's Financial Services
& Restructunng Group and
provides counsel to lenders,
debtors and other stakeholders
in restructuring and insolvency
matters He is a well-known
speaker on insolvency issues,
a member of the IIC and the
incoming-Chair of the CBA's
Bankruptcy, Insolvency &
Restructuring Section.
www.iexpert ca
INSOLVENCY 8c RESTRUCTURING
shell company that has been created solely to take part in the planand even if the principal company is insolvent. (The amalgamated
company emerging from CBCA proceedings would be solvent.)While those are the limitations of the CBCA, the statute, when
applicable, has some significant advantages over the CCAA. Thoseadvantages pertain, in part, to the threshold for creditors'ccep-tance of the plan ofarrangement. Under the CCAA, a majority ofeach class ofcreditors, representing two-thirds of the value of thosewho vote, must approve.
Under the CBCA, a judge will usually want a vote among theaffected debt-holders, but it's not a requirement of the statute. Thethreshold is at the court's discretion. "The director under the Acttakes the view that creditors representing two-thirds of the value—without a numerical majority —is sufficient approval," says JohnSandrelli, managingpartner ofFraser Milner Casgrain LLP in Van-
"OFTEN COMPANIES RESTRUCTUREBECAUSE THEY HAVE SOME HUGE AND
ONEROUS FINANCIAL OBLIGATION —SUCHAS A SUPPLY CONTRACT OR A LONG-
TERM LEASE —AND THEY WANT
TO REPUDIATE THE CONTRACT. YOUCAN'T DO THAT WITH THE CBCA."
couver. "'Ihis way, the company can get the agreement of the largerdebt-holders and doesn't have to worry about getting a majority ofthe smaller creditors."
Perhaps the CBCA's major advantage is that, as a narrower, morefocused proceeding, it is less protracted and expensive than a CCAA
filing. The latter can run one or two years, or even longer. Generally, aCBCA restructuring can be completed in two to six months.
'Ihe CCAA is very much a Bench-supervised proceeding; it caninvolve many trips to court (if only to extend the stay against thecreditors). In contrast, the CBCA can be "a more efficient processfor the right company," says Sandrelli. "Only two court appear-ances are required. The first is to apply for an interim order [thatsets in motion a meeting of creditors], the second, to seek a final
order [that gives the court's blessing to a creditors-approved planofarrangement]."
This compact proceeding occurs because the CBCA contem-
plates that an arrangement has already been agreed to when thecreditors'eeting is called. (Notice of the meeting is only given tothose creditors directly afFected.)
The debtor company is not required, under the CBCA, to ap-point a monitor to oversee the restructuring, as it must do underthe CCAA. It thereby saves on the monitor's fees, as well as legalfees for itself, the monitor and the senior secured lenders, as would
LEXPERT RANKED LAWYERS
Jackson, KlbbenFasken MarfineauDuMouiin LLP
(604) [email protected]
Mr. Jackson's practice includesmost aspects of commermal
insolvency and restructuring,
and significant cross-bordermatters. He represents financial
institutions, trustees, debtorsand creditors, and is a memberof the IIC, ABI and TMA.
Kauffman, Aubrey E.Fasken Marfineau
DuMoulin LLP
(416) [email protected]
Mr. Kauffman practises
advocacy related to restructur-
ing, bankruptcy, receivership
and cross-border insolvency
proceedings. He is a member
of the IIC, INSOL, ABI and TMA,
and former chair of the OBA's
Insolvency Section.
Kaplan, QC, William C.Blake, CasselsZt Graydon LLP
(604) 631-3304big.kaplanlblakes.corn
Mr. Kaplan's practice includes
a focus on insolvency and
restructuring law, mcluding
extensive experience with reor-
ganizations under the CCAA and
CBCA. He has been retamed
in a variety of domestic and
cross-border restructuring
matters.
Kent, Andrew J.EMcMif lan LLP
(416) 865-7160andrew.kentrlmcmigan.ca
Mr. Kent is one of Canada's
top restructuring lawyers,
combimng strong analytical
skills and clear strategic thmk-
ing with a practical bent and
drawing upon his extensive
banking and litigation experi-
ence. He is supported by an
exceptional team.
Kriiger, QC, Josef G.A.Borden Ladner
Ger vais LLP
(403) [email protected]
Mr. Kruger, an HC, CAIRP and
INSOL member, has acted
in numerous insolvency and
bankruptcy matters and ap-
peals as well as cross-border
restructurings. He is the mcom-
ing Co-Chair of the Insolvency
Section of the IBA.
Kukulowlcz, ShayneFraser Milner
Casgrain LLP
(416) [email protected]
Mr. Kukulowicz focuses on
corporate restructuring,
including complex cross-border
reorganizations, receiverships
and bankruptcies. He has
significant experience acting for
debtors, investors, syndicates,
creditor committees and court-
appointed officers.
i4 wwwuexpert.ca
INSOLVENCY Sc RESTRUCTURING
(y,a
:antheess
:ar-
hatnal
lan
.m-
the1 to
ap-cler
:galuld
be required under the CCAA. Moreover, disruption to the busi-
ness can be lessened, another significant cost consideration.The key factor, though, is that a deal be struck before the CBCA
"IT'S NOTTHATTHE CBCA PROCESSISN'T WORKING. IT'S THAT THE ACQUISITIONSMARKET HAS IMPROVED, AND LENDERSARE MORE INTERESTED IN A SALES PROCESSTHAN A REORGANIZATION."
filing. "Ifthe company has a complicated creditor structure, ifyouhave creditors who are not supportive, then the CBCA is not the
right statute," says Heather Ferris, a partner ofLawson Lundell LLPin Vancouver. "It doesn't have the flexibility to allow the process tounfold —to negotiate, for things to go sideways, to negotiate again
and then come back" to vote again.She cites the example of Catalyst Paper Corp., a Richmond,
BC, firm that filed in January under the CBCA seeking approv-al to convert debt to equity. Thwarted by a group of subordinatebondholders, the firm then resorted to the CCAA. It lost an initialcreditors'ote in May, filed an amended plan of arrangement andthen won a second vote in June.
In the last year, there have been fewer CBCA reorganizations,notes HufF. "It's not that the CBCA process isn't working. It's thatthe acquisitions market has improved, and lenders are more inter-
ested in a sales process than a reorganization."Nevertheless, says Ferris, there will be further use of the CBCA
in the future, "because it's on the radar now. But its applicabilityremains limited to certain types of reorganizations. You may see
case law develop where the courts say, "Ihis is not appropriate for aCBCA filing. You need to use real insolvency legislation.'"
Sheldon Gordon is a freelance business and legal writer in Toronto.
irder
ps
ig for
es,)urt-
Latham, L JosephGoodmans LLP
(416) 597-4211jlathamtNgoodmans.ca
Mr. Latham's practice focuseson domestic and cross-border
restructunng and insolvency
law. He has been an advisor m
many mdustries and complex
matters, including White Birch
Paper, Graceway Pharmaceuti-
cals, Circuit City, Chemtura
and Eddie Bauer.
Lee, Jeffrey M.MacPherson Leslie &Tyerman LLP
(306) [email protected]
Mr. Lee represents corporatedebtors, lenders and court-
appointed officers in restructur-
ing and insolvency proceedmgsacross Western Canada. He
has worked with clients in
the manufacturing, energy,
agnbusiness, construction,
real estate, hospitality and
mining industries.
Leslle, D. WayneFillmore Riley LLP
(204) 957-8321dwleslie@fillmore
riley.corn
Mr. Leslie's practice includes a
significant focus on bankruptcy
and insolvency law, corporate
reorganization and restructur-
mg, creditors'nddebtors'ghts,
and builders'ens.He is an ACTL Fellow, an IIC
charter member and a frequent
lecturer for the Law Society of
Manitoba and CAIRP.
Levin, Jonathan A.Fasken Martineau
DuMoulin LLP
(416) 865-4401
Mr. Levin, one of Canada's
leading business lawyers, israted by Chambers, Interna-
tional Financial Law Review,
Euromoney, Global Counsel,Lexpert and Best Lawyers, andis named as one of Canada's
30 leading dealmakersand 500 leading lawyers.
MacFarlane, AlexGowling Lafleur
Henderson LLP
(416) 369-4631alex.macfarlanelgowlings.corn
Mr. MacFarlane is a domestic
and cross-border msolvency
and restructuring lawyer and
litigator. He acts for fmancial
institutions, momtors, receivers,
trustees, Chapter 11 debtors
and creditors'ommittees,and other stakeholders.
MacKelgan QC RobertG.Stewart McKelvey(902) 444-1771rob [email protected]
Mr. MacKeigan's corporate/
commeraal practice focuses
on banking and insolvency. Has
appeared in the courts of
Nova Scotia, Quebec and
Ontano. Founding member of the
Insolvency Institute of Canada
and made a fellow in 2008. Past
president of the Nova Scotia
Barristers'ociety and the
CBA - Nova Scotia Branch.
www.lexpert ca 1 5
iCREDIT BIDDING
i
l~ ~
l,~S5ll+'
Credit bidding is anincreasingly popular tacticfor lenders. But its potentialfor abuse can blunt competitionby Sandra Rubin
LEXPERT RANKED lAWYERS
Mann David W.Fraser Milner
Casgrain LLP
(403) [email protected]
Mr. Mann is Co-Chair of FMC's
Insolvency-Restructuring Group.
An IIC member, he represents
parties in all aspects of restruc-
turing and credit enforcement.
He frequently lectures and hasmade submissions to all levels
of court, including the SCC.
M acNaughton,Michael j.Borden LadnerGervais LLP
(416) [email protected]
Has more than 25 years'xperi-ence and is one of the nationalleaders of BLG's restructuring
group. He has had significant
involvement in the Abitibi,
JTI-Macdonald, Atcon and othercases, and has wntten exten-
sively on insolvency topics.
Marchand, ClaudeNorton Rose Canada LLP
(418) 640-5034claude.marchandlnortonrose.corn
Mr. Marchand's three decadesof experience in litigation
embrace insolvency and
restructuring law, includmg
the realization of security. He
appears regularly before all
Quebec courts.
Martel, Guy P.
Stikeman Elliott LLP
(514) [email protected]
Mr. Martel, a TMA and INSOL
member, represents lenders,
borrowers and investors in
Canadian, cross-border and
foreign restructunngs. He also
advises entities specializing in
the restructuring and sale of
fmancially troubled businesses.
McCarthy, QC,Patrick T.Borden LadnerGervais LLP
(403) [email protected]
Mr. McCarthy practises in
the area of insolvency and
restructunng, both nationally
and internationally, represent-
ing momtors, receivers andtrustees as well as debtors,creditors and other potentialpurchasers of distressed assets.
McElcheran, Kevin P.
McCarthy Tetrauft LLP
(416) [email protected]
Mr. McElcheran, an IIC member,
represents debtors, creditors
and other stakeholders with
positions of influence in large
and complex commercial insol-
vencies. He is the author of thetext Commercial Insolvency in
Canada (2nd edition).
3 6 www.lexpert.ca
4.
l.ca
nber,
Irs
Il
rgensol-
f therin
McFarlane, QC, John S.Stewart McKelvey
(902) [email protected]
Mr. McFarlane's practiceincludes a focus on
restructunng and insolvency
law, including litigation. He
is a member of the Canadian
Insolvency Association and pastpresident of the Nova ScotiaBarristers'ociety.
McLean, John i.Gowling Lafleur
Henderson LLP
(604) 891-2285john.mcleanogowhngs.corn
Mr. McLean practises m
insolvency matters, including
bankruptcy, CCAA proceedings,foreclosures and creditor and
debtor rights. He has been in-
volved in most major msolvency
matters in Bntish Columbia.
Mendelsohn, MaxMcMillan LLP
(514) 987-5042max.mendelsohnIImcmillan.ca
Mr. Mendelsohn practises
domestic and cross-border
insolvency and restructur-
ing, focusing on businesses
and financial institutions. He
advised the federal government
on msolvency reform, is a
mediator and arbitrator, and a
frequent speaker.
Myers, FredGoodmans LLP
(416) 597-5923fmyersiwgoodmans.ca
Mr. Myers's commercial
litigation practice focuses on
insolvency and restructuring
cases in all levels of Canadian
courts. Over the last 20 years,
he has played a significant role
in most malor domestic and
cross-border insolvency cases.
A Fellow of the Insolvency
Institute of Canada, Mr. Milani's
practice involves all elementsof restructuring and insolvency
including work-outs, refinancing
and CCAA proceedings. He hasappeared before the Courts in
SK,AB, MB and in the SCC.
Milani, QC, Michael W.McDougall Gau/ey LLP(306) 565-5117mmilaniiomcdougallgauley.corn
O'eill, BrendanGoodmans LLP
(416) [email protected]
Mr. O'Neill's practice focuseson cross-border and trans-
national insolvencies and re-
structurmgs, bankruptcy-based
acquisitions and near-insol-
vency investing scenarios. He
represents debtors, creditors,
committees, bondholders and
other stakeholders.
www.lexpert.ca $7
INSOLVENCY & RESTRUCTURING
AN OLD FORM OF DEBT repayment has been dusted off given a
new name, and is being used by hedge funds and other sophisticatedlenders to give themselves a leg up in insolvencies and restructurings.
It's called credit bidding, and several senior insolvency and re-
structuring practitioners say it makes it easier for secured lenders to"game the system" when a company gets into trouble.
Credit bidding, in its simplest form, has been around for more
than a century. 'Ihe concept is the same as a bank taking a house in
a foreclosure because the sale price would be too low to cover the
mortgage exposure.
"THERE'S NO DOUBT IF YOU SET UP A
CREDIT BID AS A STALKING HORSE, IT
COULD HAVE A DAMPENING EFFECT ON
OTHER BIDDERS. SOMETIMES PEOPLE DO
IT BECAUSE THEY WANT A MORE ACTIVE
AUCTION, BUT SOMETIMES PEOPLE DO IT
FOR THE NASTY REASON THAT THEY WANT
TO TRY TO DAMPEN ANY COMPETITION."
These days, the use of credit bidding is becoming popular in in-
solvencies and restructurings. Secured lenders —often investment
funds —are using the debt they hold in a distressed company to take
it over and run it, hopefully better, until market conditions changeand it can be sold at a higher price.
Where the process is open to abuse is where lenders invest in a
company with the expectation that things will go badly down theroad, and they'l end up owning the asset. It's called loan to own.
"That can be somewhat sinister and that's really largely where the
process gets abused," says Patrick McCarthy, QC, co-chair of theinsolvency and restructuring group at Borden Ladner Gervais LLPin Calgary.
When the assets eventually end up for sale, either in a receiver-
ship or in a liquidating restructuring, he says, "there's opportunityfor mischief there because the lender may be involved in designingthe sale process and how it's going to work.
"They have a. lot to say about it because, by and large, it's mostlytheir money —and the receiver or the court is likely to go alongwith it unless there's something improper about it. So they mayset it up so that there are advantages for a lender trying to acquirethe asset."
What lenders mounting a loan-to-own typically do is make a
stalking-horse credit bid —an offer for the company that sets a flooron its value —using the secured debt as payment. McCarthy says itcan be designed to be "quite chilling" to other bidders.
"For example, you can have things like non-disclosure agreements
that put limitations on people who want to look at the assets, orlimitations on some of the information that's available, while at thesame time the secured creditor participating in the sale process is
essentially inside the tent and seeing what other bidders are doing."
The bid can also contain a high break fee and include a right offirst refusal or a topping provision. If that happens, it means a com-
peting bidder would have to spend the time, enterprise capital and
money on mounting a bid they know will not automatically win
them the assets —even if their bid is the highest on the table, he says
from his Calgary office."This is potentially relevant to somebody who's going to make an
acquisition, because there's the potential for the system to be gamed."
Jay Swartz, a partner in the financial restructuring and insolvency
group at Davies Ward Phillips f)c Vineberg LLP, says loan-to-own is
a tactic popular with hedge funds.
LEXPERT RANKED lAWYERS
Orzy, S. RichardBenneff Jones LLP
(416) 777-5737orzyObennettjones.corn
Mr. Orzy, chair of his firm's
Restructuring Practice, acts for
creditors and debtors in majorCanadian and cross-border re-
structurings. His pnmary clientbase is bondholders,
creditors'ommittees,
indenture trusteesand major foreign lenders.
Pasquariello, JosephGoodmans LLP
(416) 597-4216jpasquanellolgoodmans.ca
Mr. Pasquariello's practicefocuses on corporate insolven-
cies, restructurings and
bankruptcies. He representsdebtors, court officers, debtholders, committees and
other key parties in complex
domestic, cross-border and
international matters.
Pillon, ElizabethSfikeman Eiiioff LLP
(416) [email protected]
Co-heads Stikeman's
Restructunng Group. Litigation
practice emphasizes Ontano
and cross-border restructurings.
Frequently acts for debtors,court officers and purchasers
and has appeared before ON,
NS, QC, AB and BC courts.
Poplaw, MasonMcCarthy Tefrauit LLP(514) 397-4155mpoplavxNmccarthy.ca
Mr. Poplaw's litigation practiceincludes an emphasis on
insolvency and restructuring.
He appears before all Quebeccourts and m arbitrations, and
develops restructunng strate-
gies for financial institutions,
corporations and court-
appointed officers.
Reardon, PeterJ.McMiiian LLP
(604) 691-7460peter.reardonomcmillan.ca
Mr. Reardon is an insolvency
litigator who appears at all lev-
els of trial and appeal includmg
the SCC, the Federal Court and
the BCCA. His clients include
creditors, debtors, monitors,
OIPs, receivers and purchasers
of distressed assets.
Reeson, QC, Rick T.G.Miller Thomson LLP
(780) [email protected]
Mr. Reeson, QC, is a banking
and insolvency lawyer and as-
sociate counsel in the Edmon-
ton office of Miller Thomson.
His practice consists primarily
of commercial, bankruptcy
and insolvency litigation, and
business transactions.
iwwwdexpert.ca
INSOLVENCY & RESTRUCTURING
"Ifyou'e a hedge Fund and you can buy the debt at 50 cents onthe dollar and then it counts as one dolkhr in an auction, you'e gota very strong compeutive mlvantage over everyone else in tlhat mic-
uon bec.wise you )haven't paid as much," says Swartz, who is based in
Toronto. "Soyou can afford to pay more —or at least, on paper, you
appear to be payuig more."
In the Umtcd States, the iulcs and regulations around the piac-tice of credit bidding are well defined, he says. Thts is not the case m
Canada. "There have been a number ofcases where it's been used re-
cently, and people are Mying to figure out how it really works because
we don't really have rules for ityWhere tlungs can get tricky, he says —the kind of developing
issues that a sratute or rules might address —is where the bidderdoesn't have secunty over all the as~era
"Ifyou don't own ag of the class ofdebt, and you bid it, how doesit work? How do you value chat! And iFyou don't have sccunty over
precisely the same assets you'e bidding on, how does that work?There are a bunch of complexities that will be resolved over tune,
but lhaven't been fully resolved as of this pouit."We'e sall wnting the rules of the game, and how you deal with
various issues."
In dhe meanttmc, it remains a viable tool foi lenders to ay to win
a company at a lower piice, says S. Richard Orzy, leader of the na-
uonal restructunng and insolvency practice at Bcnnem Jones LLPiih Toioihto
"There's no doubt ifyou set up a credit bid as a stalking horse, itcould have a dampemng effect on other bidders. Sometimes peo-ple do it because they want a morc active aucuon, but someumes
people do it for the nascy reason thee they want to try to dampen
any competiuon."In other words, they'd like to foreclose but when you foreclose,
the )udge always lets it go to a sale process, which is a Judicially inn
sale where you have to bc fair and open. And some people don't like
the compcuuon."So iF you do a credit bid stalkuig horse with all tends of bells
and whisdes, you can likely discourage other people. Anyone whosees that will probably rhink the game is ngged. And most peoplewith money, who aren't desperate for an asset, don't want to play in a
rigged game. So immedmtely you shut down the market somewhaty
Orzy is asked whether he can see the prospect of lawsuits being
wso IF YOU DO A CREDIT BID STALKING
HORSE WITH ALL KINDS OF BELLS AND
WHISTLES, YOU CAN LIKELY DISCOURAGEOTHER PEOPLE. ANYONE WHO SEES
THAT WILL PROBABLY THINK THE GAME ISRIGGED. AND MOST PEOPLE WITH MONEY,
WHO AREN'T DESPERATE FOR AN ASSET,DON'T WANT TO PLAY IN A RIGGED GAME.
SO IMMEDIATELY YOU SHUT DOWN
THE MARKET SOMEWHAT."
brought by other srakeholders on the grounds Chat the sale processdid not maximize value for them
"The answer is, depending on exactly what was done, absolutely.It's really the bells mid whisdes that mamcr on this and ifyou'e gotenough tlhat make it so dhe market is discouiaged from participat-
ing, dhen [a lawsuit] could certauhly happen. I would answer yesy
Sandra Fluhrn io a freelance legal-affairs wnter
Reyes,TonyNorton Rose Canada LLP(416) 216-4825tony reyos6monooroso corn
Mr. Rofos, an Insolvency
tostitote of Canada aod INSOL
International member, praclisos
rostroctoong ond iosolvoocv
low, odvisiog corporate debtorsio a wide range of iodostoesaad also acbog for creditors.receivers, momtorsaod trustees.
Riendeau, AlainFoskoo Mortihoou
OuMoolio LLP
(514) 397-7678oaoadoourMaskeo corn
Mr. Rigovd prootisos domestic
aad croswborderiosolveocfadvisiog doblor companies, dkrootors ofiosolvont companies,
as well as creditors, trustees,recewers aod mooitors
Mr. Rieodeao's practiceioclodos a focus on iosolveocy
Iitigotioo at trial aod appealHo hos been involved io most
of the large CCAA rostrvctowogs
io Quebec io Ihe losl few zoom,
aod is a member ot the IIC.
Rlgaud, SylvalnNorton Rose Canada LLP
(514) [email protected]
Robinson, QC, Larry 8,Davis LLP
(403) [email protected]
Mr Robinson, an HC ond
INSOL member, speaohzes io
insolvency with an emphasis
on corporate roorgaoizatioos,creditor roolizotioos, socu.oty enforcement aod related
litigatioo Ho advises debtors,creditom, rocowem, tmstoesaod mooitors
Rogers, LincBlake, Casselsdr Graydon LLP
(416) 863-4168Imc.rogors@blokos corn
Mr Rogors's insolvency practice
focuses on cross. border work,
commeraal roorgaoizatioos,
distressed MBA, OIP lioooaogood socooil enforcement
Hrsiodostry ozpooooco
ioclodes the ootomotive,retail,
maoolaclvwog,high-tech aod
aerospace sectors.
Rosenberg, Kenneth T.Poliore Roland Roseoborg
Rothstero LLP
(416) 646-4304ken [email protected]
Mr Rosonborg's practicemclodos o focus on losolvoocv
aod rostrvctvoog al ag levels
of court. Cases include theAlgoma Steel, Bruce Power PPP,
Air Canada Ivoco Slolco HSB
ABCP, Nortol, Iodalez aod Sino
Forest proceodiogs.
wwwioxporico Lg
iPICKING A PROVINCE
i
By streamlining provincialbankruptcy rules across Canada,companies can now let businessand social considerationsdrive where they chooseto file for protectionby Kevin Marron
I M ~ ~ ~ 0 ~ I f1 'HN 1 ~ ~ ' ftiX
LEXPERT RANKED lAWYERS
Rotsztain, Michael B.Torys LLP
(416) [email protected]
Mr. Rotsztain focuses on formal
and informal restructurings
of large corporations, court
receiverships, and out-of-court
work-outs and refinancings.
His clients include compames,creditors, investors, purchasersand offimal appointees.
Roy, ChristianNorton Rose Canada LLP
(418) 640-5028christian.roytenortonrose.corn
Mr. Roy's practice emphasizes
insolvency and restructuring,
including related litigation.
He represents corporations,
monitors, trustees, financial
institutions, real estate owners
and clients in the technology
and insurance sectors.
Rubenstein, GaleGoodmans LLP
(416) [email protected]
Ms. Rubenstein's practice
focuses on corporate reorga-
nizat&ons and insolvencies,
including financial institutions,
international and Canadian.
She also advises on pension
and employee matters to
a diverse clientele, and is
a director of Hydro One.
Russell, QC, Charles R
McLennan Ross LLP
(780) [email protected]
Mr. Russell, an IIC member,
practices domestic and
cross-border restructuring and
insolvency law in the western
provinces, Ontario and the SCC.
He acts for borrowers, lenders,receivers, monitors and trusteesin various industries.
Rutmna, Ray C.Fraser Milner
Casgrain LLP
(780) [email protected]
Mr. Rutman is a member of theInsolvency Institute of Canada.
He practices msolvency and
restructuring law in Alberta
representing cred&ters,
receivers, trustees,monitors and debtors.
Sandier, TracyOsier, Hoskin
& Harcourt LLP
(416) 862-5890tsandleOosler.corn
Ms. Sandier focuses on
cross-border restructurings
and insolvenmes, as well asrecapitalizations, reorganiza-
t&ons and related transactions.She advises debtors, boards,
lending syndicates, bondhold-
ers, pnvate equity monitors
and court officers.
20 www lexpert.ca
'v v Q T
~4~ 7
PROCESS MATTERS. THE NUTS andbolts of Companies'reditors ArrangementAct (CCAA) filings across provincial bordersare a case in point.
It matters where you file for CCAA pro-tection, according to Scott Bomhof, a Toron-to-based partner at Torys LLP, because even
companies that carry on business in several
provinces are likely to have a larger stake in
one particular community, where they have
their head offices, where the majority of theirdecision makers are located, where the bulkof their employees live and work. And thedecisions that flow from CCAA processes
may matter more in that community than
anywhere else."There's a social benefit that can come
out of a restructuring in terms of preserving
jobs, and preserving consumer and supplierarrangements within the jurisdiction where
people are already situated," says Bomhof.Thanks to recent improvements in the
process of CCAA filings, it is now possiblefor people in communities across Canada toreap these benefits, Bomhof adds.
gsasliza-
:tions.
rds,hold-
II's
Schwill, Robin B.Davies Ward Phillips
8 Vineberg LLP
(416) 863-5502rschwillldwpv.corn
Mr. Schwill advises the full
roster of stakeholders in
his fmancial restructuring
and insolvency practice. His
mandates extend to all CCAA
and BIA matters including
distressed asset sales and
acquisitions, DIP financing
and creditors'ights.
Sandrelli, John R.Praser Mi incrCasgrain LLP
(604) 443-7132john.sandrelliofmc-law.
!corn
Mr. Sandrelli advises domesticand mternational compamesin restructurings, trustees,receivers, financial mstitutions,
noteholders and other creditorsin his domestic and multi-
jurisdictional insolvencyand restructunng practice.
Sellers, Edward A.Osier, Hoskin
8 Harcourt LLP
(416) [email protected]
Mr. Sellers provides mission-
critical advice on commercial
matters, with an emphasis
on restructurings and related
acquisitions, divestitures,
fmancings and governance.
St-Onge, DenisGovvling Lafieur
Henderson LLP
(514) [email protected]
Mr St Dnge specializes in all
areas of msolvency with a focuson htigious commercial law
mostly in bankmg or insolvency-
related fields. He representstrustees, financial mstitutionsand debtors.
Swartz, Jay A.Davies Ward Phillips
4 Vineberg LLP
(416) [email protected]
Mr. Swartz represents debtors,
lenders, investors, boards,
receivers, monitors and other
stakeholders in his restructur-
ing practice. He advises on
a wide variety of fmancial
products, mcludmg those
used by companies in
fmanmal distress.
Tardif, Alain N.
McCarthy Tetrauft LLP
(514) 397-4274atardi(Omcccarthy.ca
Mr. Tardif specializes in
insolvency and restructuring.
He represents corporations,
boards and other stakeholders
in restructuring. In the last five
years, Mr. Tardif has been an
advisor to the World Bank and
lectures at the Universite
de Montreal.
www.lexpert.ca 21
INSOLVENCY & RESTRUCTURING
Alex MacFarlane, a Toronto-based partner at Gowling Lafleur
Henderson LLP, who has been closely involved with efForts to draft
nationwide CCAA protocols over the past few years, says these
have contributed to a more homogeneous process that is "more ef-
ficient and thereby really keeps costs down, making it more openfor 1itigants."
This wa.s certainly not the case 10 years ago when Air Can-ada flew to Toronto to file a CCAA application in an Ontariocourt, provoking the ire of members of the Bar, politicians, em-
ployees and other stakeholders in Montreal where the companyhad long been based.
"IT'S NOT ALWAYS THE BESTTHING
WHEN A GROUP OF TORONTO LAWYERSWHO HAVE NEVER APPEARED IN COURT
IN WINNIPEG SHOW UP AND THINK
THEY CAN MAKE THE ARGUMENT
ON THEIR OWN. LOCAL COUNSEL KNOW
THE JUDGES, WHAT TO EXPECT IN TERMSOF SCHEDULING AND WHOM TO CALL
IF YOU HAVE TO ADJOURN."
The prevailing opinion among insolvency practitioners for many
years, explains Alain Tardif, a Montreal-based parmer at McCarthyTetrault LLP, was that filing in Toronto a(Forded more certainty ofgetting some ofthe initial tools that are required to facilitate restruc-
turing. For example, judges in Toronto were the first to become at-
tuned to the value ofgiving "super priority" over other creditors to
Debtor-In-Possession (DIP) financing, interim loans essential forputting various restructuring measures in place. In Quebec, on theother hand, Tardif says, some judges were reluctant to grant such
charges because they were not a part of the civil law system."Years ago, there was a real pressure to file in Toronto," says Bom-
hof. He notes that Ontario was the first jurisdiction in Canada toset up a specialized commercial court where the judges developeda level of expertise with large corporate restructurings that wasn'
available in other jurisdictions. But in recent years, commercialcourts have been established in various jurisdictions including Brit-ish Columbia, Alberta and Quebec, while judges in Manitoba andSaskatchewan have also developed a lot ofcommercial and restruc-
turing experience."Now, the similarities between jurisdictions are greater than the
differences," says Sylvain Rigaud, a partner in the Montreal office ofNorton Rose Canada LLP.
'Ihe importance ofholding bankruptcy protection hearings close
to where the insolvent company carries on business was highlightedfive years ago, when British Columbia-based lumber giant Pope andTalbot Ltd., as well as its Oregon-based parent company and othersubsidiaries filed for CCAA protection in the Ontario SuperiorCourt ofJustice. According to Bomhof, their only connection withOntario was that they had just changed their registered ofFice toOntario in order to qualify for filing there. BC-based creditors op-posed this decision and the company voluntarily agreed to transfer
the proceedings to Vancouver.
When Winnipeg-based Arctic Glacier Income Fund ran into fi-
nancial distress earlier this year, there was a lot ofconsideration as towhere to file, according to Bomhof, who represented both secured
and DIP lenders. The company, which manufactures packaged iceand distributes it across Canada and the United States, had lend-
ers and key legal counsel based in Toronto, but its head office was
LEXPERT RANKED lAWYERS
Taylor, Ashley JohnSfikeman Eiiiott LLP
(416) 869-5236ataylorlstikeman.corn
Mr. Taylor acts principally for
debtors and court-appomted
officers, as well as secured
lenders and purchasers m
insolvency proceedings. He
appears frequently before
the Ontario Superior Court
(Commercial List) and theCourt of Appeal.
Tay, Derrick C.Gowiing Lafieur
Henderson LLP
(416) 369-7330derrick.taytygowlings.corn
Mr. Tay, an IIC member,
practises domestic and
international insolvency and
restructuring. His clients spanthe health sciences, publishing,
financial services, telecom,insurance, steel, entertammentand transportation sectors,
Taylor, G. BruceAikins, MacAulay &
Thorvafdson LLP
(204) [email protected]
Mr. Taylor's corporate
insolvency practice embraces
recovery strategies, CCAA and
other restructurings, bankrupt-
cies and receiverships. Clients
mclude distress debtors, banks,
secondary lenders, equity inter-
ests and other stakeholders.
Thornton, Robert I.Thornton Grout
Finnigan LLP
(416) [email protected]
Mr. Thornton, an IIC member, is
recognized by Chambers Global
as a band 1 leading mdividual
m restructuring. He has been
described as "a leading light,"
"one of the most innovative in
the field" and "pound for pound
one of the top lawyers in town."
Vail, QC, Walter D.
Cox & Palmer(506) [email protected]
Mr. Vail's practice embracesbankruptcy and insolvency.
He represents governments,
domestic and international
companies and Fls with expen-
ence m all sectors. He is amember of the IIC and INSOL,
and past chair of CBA's NB
Insolvency section.
Vauclair, Sylvain A.Woods LLP
(514) 982-4528svauclai&woods.qc.ca
Mr. Vauclair's bankruptcy and
insolvency practice focuseson restructuring matters and
commercial litigation. Clients
mclude corporations,creditors'ommittees,
financial institu-
tions, bondholders, monitors
and trustees. He is an IIC
member.
22 wwwsexpert.ca
INSOLVENCY & RESTRUCTURINCI
for.he
ch
toedn't
ial
ndzc-
heof
ose
ednd1el
tor
ith
to)p-
fer
toedicetd-
vas
in Winnipeg. The decision was made to file in Winnipeg and, says
Bomhof, "the experience I had was of a very well-run, organizedprocess that went as smoothly as a Toronto proceeding." And theprocess turned out well for Winnipeg, as it expected that the headofftce would remain in the city, following a take-over by H.I.G.Cap-ital, LLC, a Miami-based private-equity firm.
Amendments to the CCAA in 2009 played a key role in bring-
ing uniformity to bankruptcy protection hearings across Canada.Tardif notes that with these changes, key tools used in corporate re-
structuring, such as the ability to repudiate contracts, became partof the law and would therefore be accepted in any jurisdiction.
But a set of nirty-gritty procedural changes was also required tomake CCAA proceedings run as smoothly and effectively —and
"YOU STILL HAVE TO BE MINDFUL OF THEDIFFERENCES f BETWEEN THE PROVINCES],BUT THEY CAN BE WORKED OUT.n
in similar ways —in different jurisdictions. These took the form ofa series of standard model orders on such issues as how the courtsshould approve investments or recognize foreign proceedings. Thenew protocols were initiated largely by a committee of users of theToronto commercial court, including judges, lawyers and insolven-
cy practitioners, and were eventually adopted with few variations inall major Canadian jurisdictions.
Until these standard models were put in place, lawyers were oftenconfronted with very complicated orders, based on previous pro-ceedings with various add-ons, says MacFarlane. "They were all dif'-
ferent in different jurisdictions, so you had no idea what to expect."Some differences still have to be accommodated, says Rigaud. For
example, when dealing with real estate in a restructuring, "ifyouwant to make sure you can properly register deed of transfers [you]have to be mindful ofprovincial property laws."
Provincial procedural rules also vary and there are different tech-nical rules for obtaining government authorization in various con-texts, Rigaud adds. All ofwhich, he says, makes it important to workwith local counsel.
Bomhof observes, "It's not always the best thing when a groupofToronto lawyers who have never appeared in court in Winnipegshow up and think they can make the argument on their own. Localcounsel know the judges, what to expect in terms of scheduling andwhom to call ifyou have to adjourn."
With common rules in place, says Rigaud, "you still have to bemindful of the differences, but they can be worked out."
Kevin Marron is a freelance business and legal affairs writer.
Other Lexpert-ranked Lawyers
De Blois, Guy, Langlols Kronstrom Desjardlns, L.L.P.
Germain, Mare, Stein Monast L.LP.
Godbout, Lucien, Langlols Kronstrom Desjardins, L,L.P.
Gorman, Howard A., Norton Rose Canada LLP
Kandestin, Gerald F., Kugler Kandestln, LLP
LeBlanc, QC, Denise A., Mclnnes Cooper
McCabe, QC, Michael J.,Reynolds Mirth Richards & Farmer LLP
Robitaille, Alain, Langlois Kronstrom Desjardins, L.L.P.
Schwartz, Richard W., Tapper Cuddy LLP
Smith, QC, D. Leslie, Mclnnes Cooper
Stringer, QC, John D., Mclnnes Cooper
nd
s
nd
itsItors
tu-
rs
Verbrugge, Magnus C.Borden LadnerGervals LLP
(604) 640-4198mverbruggeIblg.corn
Mr. Verbrugge acts for creditors,debtors, fmancial institu-
tions, proposal trustees and
monitors in a broad range ofrestructunngs under the CCAA
and the BIA. His experiencealso embraces foreclosures,receiverships and realizations.
Wasserman, MareOsier, Hoskin
B Harcourt LLP
(416) [email protected]
Ward, QC, Douglas G.Pltblado LLP
(204) 956-3534wardiipitbiado.corn
Mr. Ward is a Member Ementus
of the Insolvency Institute ofCanada, a Life Bencher of theLaw Society of Mamtoba and aFellow of the American College
of Trial Lawyers.
Mr. Wasserman practises com-
mercial law with emphasis on
recapitalizations, reorganiza-
tions and restructunngs. He
has acted in many complex
cross-border cases for major
debtor corporations, bondhold-
ers, equity sponsors, monitors
and acquirers.
Weisz, Steven J.Blake, CasselsB Graydon LLP
(416) [email protected]
Mr Weisz has vast experiencein all areas of complexdomestic and cross-border
restructuring and insolvency
matters. His clients includedebtors, momtors, receivers,DIP lenders, secured creditors,pension administrators, suppli-ers and purchasers.
Zarnett, LSM,BenjaminGoodmans LLP
(416) [email protected]
Mr. Zarnett's litigation practicehas included some of themost important high-profile
restructuring cases that have
come before Canadian courts
mcluding Indalex, ABCP, Sino
Forest, Stelco, Red Cross and
Confederation Life. He is
an ACTL Fellow.
Zych, Kevin J.Bennett Jones LLP
(416) [email protected]
Mr. Zych's private loan work-
outs and judicially supervised
restructunngs practice em-
phasizes cross-border matters,
including related litigation. He
acts for bondholders, creditors,
pension plans, momtors, banks,
term lenders and debtors.
www,iexpert ca 23