In CCAA proceedings, the debtor companies sought approval of a debtor-in-possession (DIP) financing facility and a super-priority DIP lenders’ charge ranking ahead of other encumbrances, including potential pension-related claims.
Two unions opposed the motion, arguing that granting super priority would undermine fiduciary duties owed to pension plan beneficiaries and that the evidentiary record was insufficient to justify the relief.
The court held that the statutory requirements under s. 11.2 of the Companies’ Creditors Arrangement Act were satisfied and that DIP financing was necessary to maintain operations and conduct a sales or restructuring process.
Applying the doctrine of federal paramountcy, the court found that the CCAA could override conflicting provincial pension legislation where necessary to avoid bankruptcy and facilitate restructuring.
The DIP facility and super-priority charge were approved.
