Court File and Parties

COURT FILE NO.: CV-19-624659-00CL

DATE: 20191007

SUPERIOR COURT OF JUSTICE – ONTARIO - COMMERICAL LIST

RE: IN THE MATTER OF THE COMPANIES’ CREDITORS ARRANGEMENT ACT, R.S.C. 1985, c. C-36, AS AMENDED

IN THE MATTER OF SYNCREON GROUP B.V. AND SYNCREON AUTOMOTIVE (UK) LTD.

APPLICATION OF CARINE VAN LANDSCHOOT UNDER SECTION 46 OF THE COMPANIES’ CREDITORS ARRANGEMENT ACT

BEFORE: Hainey, J.

COUNSEL: Linc Rogers, Aryo Shalviri and Caitlin McIntyre, for the Foreign Representative, Carine Van Landschoot

Stuart Brotman and Dylan Chochla for PricewaterhouseCoopers Inc. as Proposed Information Officer

Joseph Pasquariello, for the Ad Hoc Group of Parent Credit Facilities Lenders and Liquidity Facility Lenders

Andriana Georgallas and Katherine Lewis, U.S. attorneys for the syncreon Group

Evan Cobb for the Indenture Trustee

Stephen Brown-Okruhlik and Waël Rostom for the Exit ABL Agent

HEARD: August 8, 2019

ENDORSEMENT

OVERVIEW

[1] At the conclusion of the argument on this application I granted the Initial Recognition Order sought by the applicant with reasons to follow.

[2] The applicant, Carine Van Landschoot, sought a recognition order under Part IV of the Companies’ Creditors Arrangement Act, R.S.C., 1985, c. C-36, as amended (“CCAA”), recognizing scheme of arrangement proceedings commenced in the United Kingdom by syncreon Group B.V. (“synecron B.V.”) and syncreon Automotive (UK) Ltd. (“synecron UK”) (together the “Scheme Companies”). The Scheme Companies appointed Carine Van Landschoot to act as their foreign representative (“Foreign Representative”) in these proceedings.

[3] The Scheme Companies are part of a global group of companies (“syncreon Group”), comprised of over 60 separate legal entities with operations in over 20 different countries, including Canada. The syncreon Group provides specialized logistics, sequencing and technology services.

[4] The syncreon Group is facing significant liquidity issues. Its capital structure includes approximately $1.1 US billion in funded debt. (“Scheme Debt”) This highly leveraged position, together with other operational and market factors, have placed significant strain on the syncreon Group’s liquidity and has caused concern among certain of its key customers and suppliers.

[5] To address these liquidity concerns, the Scheme Companies commenced scheme of arrangement proceedings (“Scheme Proceedings”) before the High Court of Justice of England and Wales (“English Court”) under Part 26 of the UK Companies Act 2006 c. 46 (“Companies Act”).

[6] The application material before me includes the affidavit of Andrew J. Wilkinson (“Wilkinson Affidavit”), a solicitor licensed to practice in England and Wales. The Wilkinson Affidavit addresses schemes of arrangement under the Companies Act generally and explains that Part 26 of the Companies Act permits a company to propose a scheme of arrangement to its creditors, which, if approved by the requisite majority, imposes a compromise upon all of its creditors including a restructuring of the company’s liabilities.

[7] The syncreon Group is proposing schemes of arrangement in the Scheme Proceedings which, if accepted by its creditors and sanctioned by the English Court, will significantly reduce the groups’ overall funded debt, restructure its balance sheet and address its liquidity issues. The proposed schemes of arrangement also provide for releases in favour of certain syncreon Group entities, which are not themselves Scheme Companies, including syncreon Canada Inc. (“syncreon Canada”).

[8] The applicant sought an order, among other things, recognizing the English Proceedings as “foreign non-main proceedings” as defined in s. 45 of the CCAA.

[9] I granted the order for the following reasons.

FACTS

[10] syncreon B.V., is a private limited liability company incorporated pursuant to the laws of the Netherlands, with its head office in Tilburg, the Netherlands. Primary management and corporate finance functions for syncreon B.V. are performed in the USA at Auburn Hills, Michigan.

[11] syncreon UK, is a private company incorporated pursuant to the laws of England and Wales, with its head office in Leicertershire, England.

[12] The syncreon Group operates in Canada through syncreon Canada which has its head office in Brampton, Ontario. It has approximately 500 employees in Canada.

[13] syncreon Canada has provided a guarantee of certain of syncreon B.V.’s obligations. This guarantee is to be released under the proposed schemes of arrangement. syncreon Canada has not guaranteed any of syncreon UK’s obligations.

[14] On July 25, 2019, the English Court ordered the convening of meetings with the Scheme Companies’ creditors for the purpose of considering and voting on the proposed schemes of arrangement (“Convening Order”).

[15] In the Convening Order, the English Court declared that Carine Van Landschoot had been validly appointed by the Scheme Companies as their foreign representative to request the relief sought in this application.

[16] The applicant seeks an order that provides as follows:

(a) Declaring that the Foreign Representative is a “foreign representative” for the purpose of these recognition proceedings;

(b) Recognizing the Scheme Proceedings as “foreign non-main proceedings” as defined in s. 45 of the CCAA;

(c) Recognizing and giving effect to the Convening Order;

(d) Appointing PricewaterhouseCoopers Inc. as information officer (“Information Officer”) in respect of these recognition proceedings; and

(e) Dispensing with the publication of notice of these proceedings under s. 53(b) of the CCAA.

[17] This application is the first step in a proposed two-step process. The purpose of this first step is to establish a forum to which the Foreign Representative may return to seek further relief. If the English Court makes an order sanctioning the proposed schemes of arrangement, the Foreign Representative intends to seek an order from this court recognizing and giving full force and effect to the English Court’s order in Canada.

[18] The Scheme Companies have also commenced proceedings in the United States seeking recognition of the English Proceedings in the United States Bankruptcy Court for the District of Delaware (“U.S. Court”). A hearing to recognize the English Proceedings was scheduled in the U.S. Court for September 17, 2019.

ISSUES

[19] I must decide the following issues:

(a) Is the Foreign Representative a “foreign representative” as defined in s. 45 of the CCAA?

(b) Should the English Proceedings be recognized as “foreign non-main proceedings”?

(c) Should the Convening Order be recognized and given effect?

(d) Should the Information Officer be appointed?

(e) Should the court dispense with the requirement under s. 53(b) of the CCAA to publish notice of these recognition proceedings in one or more Canadian newspapers?

(f) Is a cross-border protocol that complies with the Judicial Insolvency Network guidelines (“JIN Guidelines”) necessary in this case?

LAW

Appointment of the Foreign Representative

[20] The evidence establishes that the board of directors of each of the Scheme Companies appointed the Foreign Representative to act as their representative in respect of the Scheme Proceedings and these recognition proceedings.

[21] In the Convening Order, the English Court declared that the Foreign Representative had been validly appointed.

[22] Accordingly, I find that the Foreign Representative meets the definition of a “foreign representative” under s. 45 of the CCAA.

Recognition of the English Proceedings

[23] No Canadian court has previously considered whether proceedings under Part 26 of the Companies Act constitute “foreign proceedings” under Part IV of the CCAA.

[24] Section 47(1) of the CCAA requires that the court make an order recognizing a foreign proceeding if it is satisfied that the application relates to a foreign proceeding; and that the applicant is a foreign representative. Having found that the applicant is a “foreign representative” for purposes of Part IV of the CCAA I must determine if the Scheme Proceedings are foreign proceedings under the CCAA..

[25] A “foreign proceeding” is defined in s. 45(1) of the CCAA as:

A judicial or administrative proceeding, including an interim proceeding, in a jurisdiction outside Canada dealing with creditors’ collective interests generally under any law relating to bankruptcy or insolvency in which a debtor company’s business and financial affairs are subject to control or supervision by a foreign court for the purpose of reorganization.

[26] I am satisfied, based upon the evidence before me, that the Scheme Proceedings are judicial proceedings in a jurisdiction outside Canada and that they deal with creditors’ collective interests generally. The Wilkinson Affidavit establishes that the scheme of arrangement provisions of the Companies Act permit companies to impose a compromise upon their creditors and are often used to affect a restructuring and a corresponding compromise of their liabilities.

[27] I am also satisfied that the Scheme Companies meet the definition of a “debtor company” under s. 2 of the CCAA. Under this section, a “debtor company” includes any “company” that is “insolvent”. A “company” includes any incorporated company having assets in Canada. The Scheme Companies are incorporated pursuant to the laws of the Netherlands and the United Kingdom. The evidence establishes that the Scheme Companies have assets in Canada in the form of funds being held on retainer by their legal counsel. Funds provided to counsel on retainer in any amount satisfies the requirement of “having assets in Canada”. (see: Re Global Light Telecommunications Inc., 2004 BCSC 745 at para 17; Re Cadillac Fairview Inc. (1995), 30 C.B.R. (3d) 17, 52 A.C.W.S. (3d) 1034 at para 13).

[28] The evidence establishes that the Scheme Companies are insolvent, as that term was interpreted in Re Stelco Inc. (2004), 129 A.C.W.S. (3d) 1065. In Re Stelco¸ Farley, J. found that “insolvency,” as used in the CCAA, includes a company “reasonably expected to run out of liquidity within [a] reasonable proximity of time as compared with the time reasonably required to implement a restructuring.”

[29] I am satisfied that the Scheme Companies meet this criterion.

[30] I accept the applicant’s submissions that schemes of arrangement under the Companies Act have a statutory nexus to insolvency legislation, as they are only available to companies which are liable to be wound-up under the English Insolvency Act 1986 c. 45.

[31] I am therefore satisfied that the Scheme Proceedings are sufficiently “related to bankruptcy or insolvency” to constitute “foreign proceedings” as defined in s. 45 of the CCAA.

The Scheme Proceedings are “Foreign Non-Main Proceedings”

[32] I have concluded that the Scheme Proceedings should be recognized as “foreign non-main proceedings”.

[33] Section 45(1) of the CCAA defines “foreign main proceeding” as a foreign proceeding in a jurisdiction where the debtor company has the centre of its main interests (“COMI”). A “foreign non-main proceeding” is defined as a foreign proceeding, other than a foreign main proceeding.

[34] For purposes of these proceedings, I accept that the key Scheme Company is syncreon B.V., which is the issuer and borrower of the Scheme Debt in respect of which syncreon Canada has provided a guarantee.

[35] While syncreon UK has its COMI in the United Kingdom, it is merely another guarantor of certain of the Scheme Debt and syncreon Canada has not guaranteed any of its obligations. It is, therefore, not the primary Scheme Company for the purpose of these recognition proceedings.

[36] Because the key Scheme Company, syncreon B.V., does not have its COMI in the UK, I am prepared to recognize the Scheme Proceedings as foreign non-main proceedings.

Recognition of the Convening Order

[37] Under s. 49 of the CCAA, on application of the Foreign Representative, the court make any order it considers appropriate for the protection of the debtor company’s property or the interests of its creditors.

[38] The Foreign Representative requests that I recognize the Convening Order. I am satisfied that the recognition of the Convening Order, which establishes the date for the meeting of the Scheme Companies’ creditors and declares that the Foreign Representative was duly appointed, is appropriate.

[39] Recognition of the Convening Order is consistent with the spirit and purpose of Part IV of the CCAA, which includes the promotion of cooperation between courts and other competent authorities in Canada with those of foreign jurisdictions, and the fair and efficient administration of cross-border insolvencies.

Appointment of the Information Officer

[40] The Foreign Representative proposes that PricewaterhouseCoopers Inc. act as Information Officer in these recognition proceedings. I am satisfied that PricewaterhouseCoopers Inc. is qualified to act as Information Officer.

[41] I have concluded that an Information Officer will assist in disseminating information to this court and to interested parties about these proceedings and the UK and US proceedings.

[42] The court will also benefit from the independent views of the Information Officer on the relief being sought in these recognition proceedings. The appointment of the proposed Information Officer is therefore approved.

Dispensing with Notice Requirements Under Section 53(b) of the CCAA

[43] Section 53(b) of the CCAA requires that, upon recognition of foreign proceedings, the Foreign Representative must publish a notice containing certain prescribed information in one or more newspapers in Canada unless otherwise directed by the Court.

[44] The Foreign Representative sought an order dispensing with this publication requirement.

[45] In the circumstances of this case, I am satisfied that affected stakeholders have been provided with ample notice of and information about the Scheme Proceedings and these recognition proceedings and requiring compliance with s. 53(b) of the CCAA would serve no valuable purpose and would result in unnecessary costs. Compliance with this section is therefore dispensed with.

Approval of a Cross-Border Protocol is Unnecessary in this Case

[46] In most cross-border insolvency proceedings the adoption of a protocol for court to court communication and cooperation at the outset of the proceedings is warranted. As described by Regional Senior Justice Morawetz (as he then was) in Re Payless ShoeSource Canada Inc., 2019 ONSC 1215, the Commercial List Users’ Committee of the Ontario Superior Court of Justice (Commercial List) has adopted the JIN Guidelines as the appropriate guidelines to govern communication and cooperation between courts in cross-border insolvencies and they have been adopted by this court in a number of cases.

[47] However, on the specific facts of this case, adoption of the JIN Guidelines is not necessary. It is not anticipated that court to court communication and cooperation will be required as there will likely only be one more hearing before the English Court for a sanction order, which, if granted, will only require one further hearing before this court and the US court for a recognition order.

[48] I granted the Initial Recognition Order for these reasons.

Hainey, J.

Date: October 9, 2019