Court File and Parties

COURT FILE NO.: CV-19-00633392-00CL DATE: 2020-06-25 ONTARIO SUPERIOR COURT OF JUSTICE (COMMERCIAL LIST)

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 ARRANGMENT OF LYDIAN INTERNATIONAL LIMITED, LYDIAN CANADA VENTURES CORPORATION AND LYDIAN U.K. CORPORATION LIMITED

BEFORE: Chief Justice Geoffrey B. Morawetz

COUNSEL: Elizabeth Pillon, Maria Konyukhova, Sanja Sopic, and Nicholas Avis, for the Applicants D. J. Miller and Rachel Bergino, for Alvarez & Marsal Inc. Robert Mason and Virginie Gauthier, for Osisko Bermuda Limited Pamela Huff and Chris Burr, for Resource Capital Fund VI L.P. David Bish and Michael Pickersgill, for Orion Capital Management Alexander Steele, for Caterpillar Financial Services (UK) Limited Bruce Darlington, for ING Bank N.V./Abs Svensk Exportkredit (publ)

HEARD by ZOOM Hearing and DECIDED: June 18, 2020 REASONS RELEASED: June 25, 2020

Endorsement

[1] At the conclusion of submissions on June 18, 2020, the record was endorsed as follows: “Motion granted. Order signed, with reasons to follow.” These are the reasons.

[2] The Applicants sought and were granted protection under the Companies’ Creditors Arrangement Act (“CCAA) by means of the Initial Order on December 23, 2019.

[3] The Applicants seek an order (the “Meeting Order”) substantially in the form of the draft order filed. The relief requested includes the following:

(a) accepting the filing the Plan under the CCAA and the Business Corporations Act (British Columbia) (the “BCBCA”); (b) approving the classification of creditors as set out in the Plan; (c) authorizing and directing the Applicants to call, hold and conduct a Meeting to vote on the Plan; (d) setting a date for the hearing of the Applicants’ motion for the Sanction and Implementation Order; and (e) sealing the unredacted Sellers Meeting Affidavit and the Caiger Affidavit.

[4] The facts with respect to this motion are set out in the unredacted affidavit of Edward A. Sellers, sworn June 15, 2020 (the “Sellers Meeting Affidavit”) and the unredacted affidavit of Mark Caiger sworn June 11, 2020 (the “Caiger Affidavit”).

[5] Capitalized terms in this endorsement which are not defined have the meanings ascribed to them in the Sellers Meeting Affidavit.

[6] Since April 30, 2020, the Applicants, in consultation with the Monitor, have been in dialogue with the Senior Lenders to establish a mechanism for an orderly transition of the Applicants’ affairs going forward. Mr. Sellers states that this dialogue resulted in the Plan.

[7] Mr. Sellers also states that the Applicants believe that the Plan represents the most efficient mechanism to effect an orderly transition of the Lydian Groups affairs and that the Plan minimizes collateral impacts on the Applicants principal operating subsidiary (Lydian Armenia), provides for winding down the proceedings before this court and the Jersey court, and avoids uncoordinated enforcement steps being taken on the Lydian Groups property.

[8] The Plan provides for recovery to the Lydian Group’s Senior Lenders. The Senior Lenders make up the only class eligible to vote on the Plan and receive a distribution.

[9] Mr. Sellers also states that Unaffected Claimants (which includes unsecured creditors, the Equipment Lenders and the Equity Claimants) do not have a right to vote or participate in the Plan. Any claim of the Equipment Lenders will not be compromised, released, discharged, cancelled and barred under the Plan and will remain outstanding after the Effective Time. Equity Claimants of Lydian International are unaffected by the Plan, but it is intended that the equity interests of Lydian International will be cancelled, extinguished and released by way of a just and equitable wind-up under the supervision of the Jersey court through the appointment of a liquidator.

[10] The steps involved in the Plan’s execution are described in paragraphs 71 to 74 of the Sellers Meeting Affidavit. Mr. Sellers states that ultimately, the Plan will result in the privatization of the Lydian Group and, when the steps are completed, the CCAA proceedings can be terminated and the Monitor discharged. The Senior Lenders will be the sole shareholders of the Restructured Lydian.

[11] The Plan provides for certain releases, which are more fully described in the Sellers Meeting Affidavit at paragraph 83.

[12] The Plan provides for a Plan Implementation Date on or prior to June 30, 2020.

[13] The proposed Meeting Order provides that the vote with respect to the Plan will occur at a videoconference meeting on June 19, 2020. The only persons entitled to attend the Meeting are the Applicants, their director(s), the Monitor, BMO, the Affected Creditors and their respective legal counsel. The only persons entitled to vote at the meeting are Affected Creditors holding Affected Claims (i.e. the Senior Lenders).

[14] Mr. Sellers states that if the Plan is approved at the Meeting by the required majority, the Applicants will proceed with a motion for an order sanctioning the Plan on June 29, 2020.

[15] The issues for consideration are whether:

(a) the Plan should be accepted for filing and the Meeting should be authorized to proceed; (b) the proposed classification for the purposes of voting on the Plan is appropriate; and (c) the unredacted Sellers Meeting Affidavit and Caiger Affidavit should be sealed.

[16] No party opposed the requested relief.

[17] Mr. Sellers states that the Applicants’ Senior Lenders are prepared to fund the costs associated with the implementation of the Plan. I am satisfied that the Plan has a degree of support and it is appropriate to summon a creditors’ meeting for the purposes of voting on the Plan.

[18] At this time, I am not required to consider the fairness and reasonableness of the Plan. Such issues will be considered at the Sanction Hearing, and only if the Plan is approved by the Required Majority of Affected Creditors at the Meeting.

[19] The timeline for approval of the Plan is short. However, given that the Affected Creditors are few in number, and that each of them has been engaged in these CCAA proceedings, I am satisfied that they have received reasonable notice of the proposed process for the Meeting and Sanction Hearing.

[20] I also note that the Monitor supports the proposed procedures and timelines detailed in the Meeting Order.

[21] The Applicants request that the Affected Creditors be placed in a single class for the purposes of voting on the Plan and receiving a distribution thereunder.

[22] Classes are to be comprised of creditors with a “commonality of interest”. The factors to be considered in determining whether creditors have a “commonality of interest” are listed in s. 22 (2) of the CCAA.

Factors (2) For the purpose of subsection (1), creditors may be included in the same class if their interests or rights are sufficiently similar to give them a commonality of interest, taking into account:

(a) the nature of the debts, liabilities or obligations giving rise to their claim; (b) the nature and rank of any security in respect of their claims; (c) the remedies available to the creditors and the absence of the compromise or arrangement being sanctioned, and the extent to which the creditors would recover their claims by exercising those remedies; and (d) any further criteria, consistent with those set out in paragraphs (a) to (c), that are prescribed.

[23] Classification is a fact driven exercised that is dependent upon the circumstances of each particular case and care must be taken to avoid fragmentation, which could render it excessively difficult to obtain approval of a plan and therefore defeat the purposes of the CCAA (see: Stelco Inc., Re at paras. 22 and 35).

[24] The Applicants submit the taking into account the circumstances of this case, there should be one class of creditors – the Affected Creditors – the purposes of voting on the Plan and receiving a distribution. The Applicants further submit that the Affected Creditors are each secured creditors with proven secured claims. The commonality in the nature of the debts owed to these secured creditors and the legal remedies available to these parties as secured creditors lead to the conclusion that the Affected Creditors should be placed in the same class, as proposed in the Meeting Order and the Plan. I accept this submission.

[25] I am satisfied that it is appropriate to accept the filing of the Plan under the CCAA and the BCBCA and to approve the classification of creditors as set out in the Plan for the purposes of the Meeting and voting on the Plan. I am also satisfied that it is appropriate to direct the Applicants to call, holding and conduct the Meeting to vote on the Plan and to authorize notice of the meeting to be effected through service of the Meeting Order on counsel for the Affected Creditors. In the event that the Affected Creditors approve of the Plan, the motion for the Sanction and Implementation Order will be heard on June 29, 2020.

[26] Finally, the Applicants seek to seal the unredacted Sellers Meeting Affidavit and Caiger Affidavit on the basis that the redacted portions of the respective affidavits contain commercially sensitive information.

[27] I have previously granted sealing orders in these CCAA proceedings where the documents in question contains sensitive commercial information, the disclosure of which could be harmful to the stakeholders. In my view, the sealing request currently being sought is consistent with previous orders in these CCAA proceedings (see: Lydian International Limited (Re), 2020 ONSC 2700 at paragraphs 18 – 19).

[28] The unredacted Sellers Meeting Affidavit and Caiger Affidavit contain information pertaining to the SISP and solicitation process for the financing of the Treaty Arbitration, and the reasons why perspective transactions did not lead to transactions capable of completion. I am satisfied that the disclosure of this information could be harmful to the stakeholders. Having considered the principles set out in Sierra Club of Canada v. Canada (Minister of Finance), 2000 SCC 41 at para. 53, I am satisfied that it is appropriate to grant the requested sealing order.

[29] In summary, the motion is granted and the order has been signed.

Chief Justice Geoffrey B. Morawetz Date: June 25, 2020