Caroline Descours

McEwan Enterprises Inc. (MEI), a restaurant and catering business, applied for an Initial Order under the CCAA due to financial challenges exacerbated by the COVID-19 pandemic.

The court found MEI to be a 'debtor company' under the CCAA and granted the Initial Order, including a stay of proceedings, authorization to pay certain pre-filing obligations, and the approval of Administration and Directors' Charges.

The court also extended the stay of proceedings to non-filing parties, including the founder Mark McEwan, to prevent disruption to the restructuring efforts.

However, the court declined MEI's request to dispense with the standard CCAA creditor notice provisions, citing the open court presumption.

The applicant, Sherritt International Corporation, sought final approval of a plan of arrangement under section 192 of the Canada Business Corporations Act to restructure its debt.

The application was opposed by two term lenders, who argued that their term loan was not a 'security' capable of arrangement, that they were unfairly grouped in the same voting class as unsecured noteholders, and that the plan was substantively unfair.

The Superior Court of Justice rejected these arguments, finding that the term loan fell within the statutory definition of a debt obligation, that the voting classification was appropriate given the shared unsecured nature of the claims, and that the plan was fair and reasonable.

The court approved the plan of arrangement, while also providing a detailed critique of the limitations and lack of independence of the fairness opinion submitted by the applicant.

The applicants brought an ex parte motion for a preliminary interim order under section 192(4) of the Canada Business Corporations Act to facilitate a recapitalization transaction.

The proposed arrangement aimed to reduce the company's debt obligations by more than $2 billion.

The court found that the statutory requirements were met, the arrangement was put forward in good faith, and it was impracticable to effect the fundamental change under any other provision.

The court granted the preliminary interim order, including a broad stay of proceedings, to allow the company to advance the recapitalization transaction.

The applicant, Zochem Inc., applied under Part IV of the CCAA for recognition of First Day Orders made by the U.S. Bankruptcy Court in Chapter 11 proceedings.

The court found that the U.S. proceeding was a foreign main proceeding, as the debtors were managed as an integrated group from the United States, despite Zochem's operations being in Ontario.

The court also recognized the interim financing order and granted a super-priority charge for the DIP lender, noting that the interim advance was necessary to meet payroll and that the directors must act in the best interests of the Canadian corporation.

The applicants sought approval of a sale of substantially all of their assets to a newly incorporated entity owned by their first lien lenders pursuant to a credit bid, effectively wiping out the second lien lenders.

RBC, a first and second lien lender, opposed certain ancillary relief.

The court approved the sale transaction, finding the pre-filing sales process reasonable under the Soundair principles and s. 36(3) of the CCAA.

However, the court declined to grant a broad third-party release by the first lien lenders, refused to bind RBC to a shareholders' agreement, and dismissed RBC's motions for pre-filing interest, fees, and a share of a consent fee.

In a comeback motion under the CCAA, the second lien agent challenged the appointment of the proposed monitor on the basis that its affiliate had acted for the debtor for more than two years, directed the pre-filing SISP, and participated in negotiations concerning the restructuring that would eliminate second lien recoveries.

The court held that a monitor must be independent and be seen to be independent, and found the proposed monitor could not impartially advise the court on the central issue of the reliability of the pre-filing sales process.

The court replaced the proposed monitor with another insolvency firm.

The court also ordered that, pending further order, the debtor could not pay interest or other expenses to the first lien lenders unless the same payments owing to the second lien lenders were made.

The applicants, comprising the Cinram Group, sought an Initial Order under the CCAA.

The court found that the applicants were debtor companies and insolvent, facing a looming liquidity crisis.

The court granted the Initial Order, which included a stay of proceedings extended to non-applicant subsidiaries, authorization to pay critical pre-filing obligations, and approval of various charges including a $15 million DIP financing charge, a $3.5 million administration charge, a $13 million directors' and officers' charge, and a $3 million KERP charge.

The court also authorized the foreign representative to seek recognition under Chapter 15 of the US Bankruptcy Code.

The moving party union appealed a decision of a Claims Officer in a CCAA proceeding.

The Claims Officer had determined that a motion in annulment brought by the union in Quebec regarding an arbitration award for lockout damages was not meritorious.

The Superior Court of Justice dismissed the appeal, finding that the Claims Officer applied the correct standard and made no error in principle or law in concluding that the arbitrator had properly exercised his jurisdiction.