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Court clarifies debt subordination, ordinary course of business, and security valuation in CCAA restructuring.
In a complex CCAA restructuring of Stelco Inc., four appeals were brought regarding the distribution of assets among creditors.
The Court of Appeal upheld the motion judge's findings that Senior Debt Holders could enforce subordination and turnover provisions against Noteholders via trust principles, and that post-filing interest was payable.
However, the Court reversed the motion judge on two key issues: it found that a massive IT outsourcing contract was not in the 'ordinary course of business', thereby elevating its assignee to Senior Debt status, and it ruled that the distributed securities must be valued at the 'Plan value' ($5.50 per share) rather than the post-emergence market value.