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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

Director, StrategicPartnerships:

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Client Development:Grace So

Account Manager:Joseph Galea

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Administrative Assistant:Patricia Ramsey

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All rights reserved. Contentsmay not be repnnted without

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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


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


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


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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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


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


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


Mr. Chadwick's corporatepractice focuses on national,

cross border and international


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

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Chai(on, Harvey G.Chal tons LLP


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


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


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


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


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


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


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.


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


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


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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Companies can save timeand expense by restructuring

under the Canada BusinessCorporations Act,

but only in some casesby Sheldon Gordon

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ada 2012.

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


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

[email protected]

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


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


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


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


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


Jackson, KlbbenFasken MarfineauDuMouiin LLP


Mr. Jackson's practice includesmost aspects of commermal


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


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


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


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


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

[email protected]

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


Mann David W.Fraser Milner

Casgrain LLP


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


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


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


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.



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


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


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


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


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


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.


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


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


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


"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


Robinson, QC, Larry 8,Davis LLP


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


Rotsztain, Michael B.Torys LLP


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


including related litigation.

He represents corporations,

monitors, trustees, financial

institutions, real estate owners

and clients in the technology

and insurance sectors.

Rubenstein, GaleGoodmans LLP


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


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


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


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


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


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.


(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


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


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


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


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


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


Mr Weisz has vast experiencein all areas of complexdomestic and cross-border


matters. His clients includedebtors, momtors, receivers,DIP lenders, secured creditors,pension administrators, suppli-ers and purchasers.

Zarnett, LSM,BenjaminGoodmans LLP


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


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

v+@ - goodmansbankruptcy, proposals, windups, liquidations, reorgamzations, restructurings,...

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