CITATION: Re Banro Corporation, 2017 ONSC 2176

COURT FILE NO.: CV-17-11700-00CL

DATE: 20170406

ONTARIO SUPERIOR COURT OF JUSTICE (COMMERCIAL LIST)

IN THE MATTER OF an application under section 192 of the *Canada Business Corporations Act*, R.S.C. 1985, c. C-44, as amended

AND IN THE MATTER OF Rule 14.05(2) of the Rules of Civil Procedure

AND IN THE MATTER OF a proposed arrangement of Banro Corporation, involving certain of its debt holders and shareholders and 10095699 Canada Inc.

BEFORE: F.L. Myers J.

COUNSEL:

T. Reyes and A. Schmitt, for the Applicants. B. O’Neill & R. Baulke for Gramercy Funds Management LLC. A. Kauffman for Resource Finance Works Limited, RFW Banro Investments Limited, and Baiyin International Investments Limited & Affiliates.

HEARD: April 6, 2017

ENDORSEMENT (transcription)

[1] The arrangement is a piece of a larger restructuring. It is important to avoid destabilizing the subsidiaries and the CBCA provides a helpful manner of obtaining the relief sought while minimizing risk of causing unnecessary defaults abroad. The arrangement is in large part a compromise of debt that might be properly or more properly the subject of a CCAA application. But I am satisfied that: (1) it would be inconvenient if not impossible to engage in the transactions proposed absent an arrangement; and (2) there is clear evidence that the entity that emerges will be solvent. Moreover, I am satisfied that the transactions proposed both in the arrangement and the larger restructuring are fair and reasonable. There has been compliance with the interim order in all respects. I specifically make the Order sought at para. 3(b) of the draft to assist the Applicants and US securities regulators. Although that order goes beyond the transactions set out in the arrangement and includes an assessment of transactions in the broader restructuring, I have been provided with ample evidence including a very comprehensive and helpful set of fairness opinions that enable the Court to reach a proper conclusion.

[2] I am very dubious as to the appropriateness of the order sought in paras. 10 & 11 of the draft. The aim is to prevent third parties from enforcing rights based on events of default cured by the arrangement. But this is not a CCAA proceeding. The arrangement is not a comprehensive compromise among creditors intended to facilitate a restructuring of a debtor’s finances to avoid the devastation of bankruptcy. A CBCA plan is intended to assist corporations implement fundamental changes that they cannot conveniently do on their own under corporate law. While CBCA arrangements allow debt reorganization at times, there are too few safeguards for creditors and other interested parties to treat a CBCA arrangement as equivalent to a CCAA plan. If a debtor needs to cure a prevailing or threatened insolvency by compromising debt and curing defaults comprehensively, a CCAA plan with service on all parties affected by the compromise and curing provisions is required.

[3] As the applicants made the notification required in the interim order, I will make the orders sought in paras. 10 & 11 of the draft. Whether this binds non-parties in foreign countries with claims against subsidiaries who are not before this Court is for others to say. But I agree with counsels’ submissions that the Court should be willing to make orders to protect the sanctity of the arrangement that it approves and s. 192 of the CBCA is certainly wide enough to allow for this.

F.L. Myers J.

Date: April 6, 2017