COURT FILE NO.: CV-19-615560-00CL DATE: 2019/04/12 SUPERIOR COURT OF JUSTICE – ONTARIO

• COMMERCIAL LIST

RE: IN THE MATTER OF THE COMPANIES’ CREDITORS ARRANGEMENT ACT, R.S.C. 1985, c. C-36, AS AMENDED AND IN THE MATTER OF A PLAN OF COMPROMISE OR ARRANGEMENT OF BONDFIELD CONSTRUCTION COMPANY , 950504 ONTARIO INC., 352021 ONTARIO LIMITED, 2433485 ONTARIO INC. AND 2433486 ONTARIO INC. (each, an “ Applicant ”, and collectively, the “ Applicants ”)

BEFORE: Hainey J.

COUNSEL: J. Dacks, M. De Lellis, S. Irving for the Applicants S. Weisz and C. Fell for the Directors and Officers A. MacFarlane and B. Bissell for Zurich Insurance H. Wise and C. Armstrong for Bridging Finance Inc., as Agent C. Powell and J. Stam for Travelers Guarantee Company of Canada A. Merskey and E. Cobb for the Proposed Monitor S. Bomhof for KSV Kofman Inc., in its capacity as Receiver of 1033803 Ontario Inc. (operating as Forma-Con) D. Yiokaris for LIUNA Locals 507 and 837 and IUOE Local 793 M. Citak and C. Junior for John Aquino E. Craddock for Infrastructure Ontario G. Benchetrit for City of Toronto and TTC J. Long for Tam-Kal Limited F. Souza for Urban Electrical, Urban Mechanical, AGF Rebar Inc., General Sprinklers, Nelmar Drywall, Better Iron, Interborough Electric S. Bellissimo for CGG M. Mazzuca and A. Makrinos for Carpenters District Counsel of Ontario A. Grossi for Pave-Al Limited

HEARD: April 3, 2019

Endorsement

Background

1Bondfield Construction Company Limited and the other applicants (“Bondfield Group”) seek relief under the Companies’ Creditors Arrangement Act , R.S.C. 1985, c. C-36, as amended (“ CCAA ”).

2The Bondfield Group is insolvent and has been unable to operate without financial support from its surety, Zurich Insurance Company Ltd. (“Zurich”) since August 2018.

3The Bondfield Group’s application is not opposed and is the result of extensive negotiations among its stakeholders.

Facts

4The Bondfield Group is a leading design – build and general construction company that provides services to public and private sector clients. It is a family owned and operated business that has operated successfully in Ontario for over 45 years.

5The Bondfield Group is currently involved in over $1 billion of active construction contracts on more than 30 projects. Many of its projects are public–private partnerships. It currently provides construction services for institutions including St. Joseph’s Care Centre, Sunnybrook Health Services Centre, Centennial College, the University of Waterloo, the TTC and Union Station.

6I am satisfied that there is an important public interest in ensuring that these construction projects are successfully completed in a timely manner as they will provide important infrastructure for the Province of Ontario.

7The Bondfield Group is unable to pay its liabilities as they come due and has insufficient funds to operate in the ordinary course of business without third party financial support.

8It sought and obtained financing from Bridging Finance Ltd. (“Bridging”). The Bridging loan has now matured and Bridging has made demand for repayment of over $52 million.

9Zurich is the surety for the Bondfield Group. All but one of the Bondfield Group’s current construction projects have bonds issued by Zurich that guarantee the Bondfield Group’s performance of its obligations under these construction contracts. Since August 2018 Zurich has paid the Bondfield Group’s financial obligations allowing it to continue to operate.

10The Bondfield Group also faces over 200 lawsuits claiming hundreds of millions of dollars.

11I am satisfied that under all of these circumstances the Bondfield Group urgently requires a stay of proceedings and sufficient liquidity to maintain ongoing operations so that it is able to continue construction on its many significant infrastructure projects and to reorganize its affairs to regain financial and operational stability. In the absence of a stay of proceedings the Bondfield Group will likely have to shut down its operations with the resulting loss of over 330 jobs. Further, critical infrastructure projects in Ontario will be seriously imperiled.

Issues

12I must consider the following issues:

(a) Do the applicants meet the criteria for protection under the CCAA ? (b) Should I grant a stay of proceedings over the applicants? (c) Should I approve the proposed DIP Facility and DIP Lending Charge? (d) Should I approve the proposed Administration Charge? and (e) Should I approve the proposed Directors’ Charge?

Should the applicants be granted CCAA protection?

13I am satisfied that the applicants meet the criteria established for protection under the CCAA . They are affiliated Canadian creditor companies with total claims against them of over $5 million and they are insolvent. Further, Zurich, a significant creditor and EY, the proposed Monitor, support the application.

Should a stay be granted?

14I am also satisfied that a stay of proceedings pursuant to s. 11.02(1) of the CCAA should be granted so as to maintain the status quo for a period of time to allow the applicants breathing space to reorganize their affairs. In this way the Bondfield Group will be able to continue operating and provide ongoing employment to 330 employees and contractors. It will also enable it to continue providing construction services to important Ontario infrastructure projects.

15I agree with the applicants’ submission that a stay of proceedings under the CCAA is preferable to a receivership which would inevitably result in the end of the Bondfield Group, destroying any enterprise value for its various stakeholders.

Should the DIP Facility and the DIP Lending Charge be approved?

16Section 11.2 of the CCAA gives the court authority to grant a debtor-in-possession financing charge (“DIP”). In doing so I must consider the factors set out in s. 11.2(4) of the CCAA .

17Zurich has agreed to fund the Bondfield Group’s DIP facility.

18DIP financing should be restricted to an amount that is reasonably necessary to meet the debtor’s needs while a restructuring plan is being developed. DIP financing will be ordered where the benefits of financing to all stakeholders outweigh the potential prejudice to certain of the creditors.

19In this case, Zurich has agreed to fund the Bondfield Group’s DIP facility. By virtue of its subrogated trust claims under s. 8 of the Construction Act , Zurich stands in the position of a first secured creditor on a project by project basis with respect to amounts it has paid out under bonded contracts. For the past six months, the Bondfield Group has been unable to continue its day-to-day operations without third-party funding from Zurich. Having paid over $200 million on account of its bonded obligations and other operational funding for the Bondfield Group, Zurich is not willing to continue providing unsecured funding for day-to-day operations without the protection of a DIP lending charge.

20Without the financial support of Zurich’s DIP facility, the Bondfield Group will be unable to continue day-to-day operations and to continue its important construction projects. Efforts to find alternative refinancing options have failed. In my view, the proposed DIP facility and the proposed DIP Lending Charge are essential to the Bondfield Group’s successful restructuring.

21Recognizing the potential impact of such financing on the Bondfield Group’s other creditors, the applicants are seeking a tailored DIP facility in the amount of $8 million to be used to pay ordinary course operating expenses other than the costs covered by Zurich’s bonded obligations

22Section 11.2(1) of the CCAA provides that a DIP lending charge may not secure an obligation that existed before the order was made. Accordingly, the proposed DIP Lending Charge will not secure any of the applicants’ pre-filing obligations.

23I have concluded that the following factors support the granting of the DIP Lending Charge, many of which are referenced in s. 11.2(4) of the CCAA :

(a) the applicants are unable to continue operations without third-party funding; (b) Zurich has indicated that it will not continue to provide funding of costs not covered by its bonded obligations without the benefit of a DIP Lending Charge; (c) it is anticipated that the DIP facility will provide the applicants with the funds necessary to maintain operations during the restructuring process, and the DIP facility has been tailored to minimize the potential impact on secured creditors; (d) the DIP Lending Charge will not secure any pre-filing obligations; and (e) the proposed Monitor is supportive of the DIP facility and the DIP Lending Charge.

Should the Administration Charge be approved?

24The applicants request a first priority charge on all of its property as security for the professional fees and disbursements of the Monitor, its counsel, counsel to the applicants and counsel to the Board of Directors to a maximum of $1 million.

25The CCAA expressly provides that courts have jurisdiction to grant a priority administration charge.

26I agree with the applicants’ submission that the nature of its business requires the expertise, knowledge, and continuing participation of the beneficiaries of the proposed Administrative Charge in order to complete a successful restructuring. The professionals who are to be beneficiaries of the proposed Administration Charge have contributed and will continue to contribute to the applicants’ restructuring. In my view, the Administrative Charge is fair and reasonable, and it is necessary to ensure that these key individuals continue to participate in these proceedings.

Should the Directors’ Charge be approved?

27The applicants also request that the Bondfield Group’s officers and directors be protected by a Director’s Charge of $3 million on the applicants’ property subject to the trust provisions of the Construction Act . The Directors’ Charge will rank behind the Administrative Charge and the DIP Lending Charge.

28The Bondfield Group’s present and former officers and directors do not currently benefit from any liability insurance policies and the Bondfield Group has not provided contractual indemnities in favour of any of its current or former officers or directors. In light of the potential liabilities and the lack of liability insurance or contractual indemnification, I am of the view that the proposed Directors’ Charge is appropriate. This will ensure that a level of continuity is maintained within the Bondfield Group’s management so that the restructuring plan can be achieved for the benefit of all of the Bonfield Group’s stakeholders. For these reasons the Directors’ Charge is approved.

29I should add that despite Mr. Citak’s able argument I am not persuaded that the Directors’ Charge should apply to John Aquino who is no longer with the Bondfield Group.

Conclusion

30For all of these reasons, I am satisfied that the proposed Initial Order should be granted on the terms of the attached order, subject to the following provisions that are agreed to by the parties.

31There shall be an interim stay of proceedings in favour of 2032686 Ontario Inc. (“BMC Masonry”) and John Aquino, solely in his capacity as a director of BMC Masonry, in order to allow BMC Masonry to continue its ordinary course business operations until the comeback motion.

32Without further order of this court, nothing in this order affects the rights or priority of the interests of the Bank of Montreal, as agent for the respective lenders in respect of the SMH and CMH projects or The TD Bank, as agent for the lenders in respect of the HGH project, in the contract receivables payable to BCCL in respect of such projects, it being presently understood that this relates to their interests in the legislative holdbacks under the Contractor Direct Agreement. Any further hearing on this issue would be on a de novo basis.

33I commend all counsel and the proposed Monitor for negotiating a commercially reasonable resolution under difficult circumstances.