Court File and Parties

COURT FILE NO.: CV-24-00717340-00CL DATE: 20241118

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 ARRANGEMENT OF PRIDE GROUP HOLDINGS INC. and those Applicants listed on Schedule “A” hereto (each, an “Applicant”, and collectively, the “Applicants”)

RE: Pride Group Holdings Inc. et al., Applicants

BEFORE: Peter J. Osborne J.

COUNSEL: Rachel Nicholson, Leanne Williams, Puya Fesharaki and Ines Ferreira, for Pride Group Holdings Geoff Halla, Saneea Tanvir and Heather Meredith, for National Bank of Canada John Salmas, for BMO Abir Shamin, for Certain Employees of Pride Group Elayna Dushenski, for Roynat / BNS Harvey Chaiton and Blair McRadu, for Mitsubishi HC Capital Caroline Descours, for Regions Bank, Regions Equipment Finance Corporation and Regions Commercial Equipment Finance LLC Kelly Bourassa, for the Court Appointed Monitor Stuart Brotman and Daniel Richer, for DIP / Syndicate Lenders Joshua Foster and Raj Sahni, for the Directors Olivier Benchava, Andrew Adessky, Randall Benson, Alex Morrison and Simone Carvalho, Proposed Receiver from Richter

HEARD: November 18, 2024

ENDORSEMENT

[1] National Bank of Canada (“National”) moves for two orders:

a. an order:

i. lifting the stay pursuant to section 11.02(2) of the CCAA to permit the issuing of a Notice of Application pursuant to which Richter (originally FTI as referred to in the motion materials) would be sought to be appointed as receiver and manager without security of each of the Properties and other property of the Real Estate SPEs pursuant to section 243 of the BIA and section 101 of the CJA;

ii. in the alternative, authorizing National to set off post-filing mortgage payments owed to it on each of the Properties against post-filing rent collected from the Properties; and

iii. directing the Monitor to provide an accounting of any amounts claimed in respect of the Administration Charge in respect of each of the Properties; and

b. a sealing order in respect of Confidential Exhibits 1, 2 and 3 to the Affidavit of Dana Ades-Landy sworn November 13, 2024.

[2] The motion is supported by the DIP Syndicate and BMO, each of which advises that it intends to bring its own motion for the appointment of receivers over properties of the Pride Entities in respect of which it has security.

[3] The motion is opposed by the Applicants, Mitsubishi and the Court-appointed Monitor, subject to an agreement in respect of net rents as further discussed below.

[4] Defined terms in this Endorsement have the meaning given to them in earlier Endorsements made in this CCAA proceeding and/or the motion materials and the 18^th Report of the Monitor dated November 17, 2024, unless otherwise stated.

[5] For the reasons that follow, the motion for the lift stay to appoint a receiver is dismissed, on the terms proposed by the Applicants and supported by the Monitor, and specifically that the Rent Enforcement Order is granted.

[6] National is the first ranking mortgage lender to three of the Applicant entities, each of which is a single-purpose entity (SPE) formed for the sole purpose of holding title to real property. Four properties are the subject of this motion (the “Properties”):

a. the Dorval Property, located at 1943 and 1945 55^th Ave., Dorval, Québec;

b. 3550 Pitfield, located at 3550-3590 Pitfield Boulevard, Montréal, Québec;

c. 3600 Pitfield, located at 3600-3650 Pitfield Boulevard, Montréal, Québec; and

d. the Steeles Property located at 10874 Steeles Avenue East, Halton Hills, Ontario.

[7] The facilities pursuant to which the mortgages were granted on those Properties are in default. That is not disputed.

[8] National seeks the lifting of the stay to allow for the appointment of a receiver for the reasons set out in its motion materials and particularly the Affidavit of Dana Ades-Landy sworn November 13, 2024.

[9] As a housekeeping point, the motion materials refer to the proposed appointment of FTI as that receiver. Over the weekend, certain parties raised issues of possible conflict with FTI, and for expediency National now proposes that Richter be appointed instead. Richter has filed a consent to so act if so appointed, and the motion materials are taken to refer to Richter instead of FTI as appropriate. Richter maintains offices and professionals in Montréal as does FTI. No party had any issue with this, and I dispensed with the requirement for National to serve and file formal motion materials to give effect to this substitution and corresponding amendment.

[10] National submits that the Real Estate SPEs were included as Applicants when this CCAA proceeding was commenced. Now that this proceeding is effectively a liquidation and wind-down, National submits that those entities should be removed from the proceeding.

[11] The Applicants (Pride Entities) rely on the affidavit of the Chief Restructuring Officer, Randall Benson, sworn November 16, 2024 and the 18^th report of the Monitor. While the Applicants oppose the appointment of a new receiver, the Pride Entities do not oppose paying over to National all rent actually received in respect of the Properties, net of paid and accruing operating and holding costs and taxes. The Monitor and CRO support this.

[12] National submits that it has lost confidence in the CRO and the Monitor to conduct the sale of the four Properties. National submits, and its affiant states (para 10), that it does not believe there is any realistic prospect that there is equity in these Properties. This is based on, among other things, updated appraisals obtained by National from CBRE, as well as from the objective fact that all of these Properties are currently marketed for sale and have been for some time, none has yielded a binding offer.

[13] National further submits that there is no prejudice to the Applicants since none of these Properties are required for the operations of the Pride Entities. They submit that a receiver should be appointed, which can focus on realizing on these Properties, without the added costs, delay and complications of the broader CCAA process.

[14] There is no issue about the test for the appointment of a receiver under either the BIA or the CJA: is it just or convenient to do so?

[15] In my view, and in the particular circumstances of this case considered as against the factors set out in the jurisprudence, the answer to that question is no.

[16] While I fully appreciate that this CCAA has been lengthy and complicated, in my view the sales process currently underway for these four Properties has not.

[17] The Properties are currently marketed for sale pursuant to the Real Estate Protocol previously approved by Court order in this proceeding. That Protocol was implemented at the request of the DIP Syndicate and on the consent of all mortgagees.

[18] At present, the Protocol is generally working. Numerous properties of the Pride Entities have been sold, many are listed for sale, and a number of properties are the subject of pending agreements in respect of which due diligence or other pre-closing steps are being completed.

[19] These four Properties in particular have been listed for some time. 3600 Pitfield is the subject of a recently received letter of interest from a potential purchaser for a sale price which, if closed, could pay out National in full on that property.

[20] Counsel for National was candid in submissions that Richter, if appointed, would require a broker to be engaged, as is the case at present. Counsel was equally candid that National may in fact seek to have the receiver, if appointed, continue that broker engagement. In short, it is possible if not probable that the very same listing agent will have carriage of the sale and marketing process for these four Properties, whether or not the receiver is appointed. I see no significant benefit in appointing another court officer, with attendant fees, to perform that role.

[21] In my view, there is no evidence of any material or significant advantage that yet another court officer such as the proposed receiver, could do to realize on these Properties that is not already being done.

[22] I also observe that the current sale process has not only been undertaken in consultation with National, and any sale is subject to Court approval, but National has been kept abreast of developments along the way. In addition, the CRO, the Monitor and their current listing agent are very prepared to accept any advice, recommendations or suggestions from or on behalf of National and its professional advisors. The CRO and the Monitor have been providing, and will continue to provide, to National all expressions of interest, offers or other information about the Properties.

[23] At present, the Pride Entities and the Monitor cannot accept any offer for the purchase of any of the Properties pursuant to the Real Estate Protocol without the consent of National in any event. They will continue to take direction from National with respect to accepting or rejecting any offers, subject to the views of the DIP Agent. National has not made any specific request of the CRO or the Monitor with respect to the marketing and sale of the Properties to date.

[24] In addition, I am not persuaded that another court officer in the form of a new receiver would be more cost-efficient. The 18^th Report reflects that incurred professional costs allocated to these four Properties to date are approximately $34,000 in total, accrued over the course of seven months.

[25] In further addition, the interests of other parties in these Properties must be accounted for. While National has not (for apparently valid contractual privacy and confidentiality reasons) shared with the Monitor or the CRO the four appraisals it has obtained, they date from May, 2024 and are therefore somewhat stale in terms of an evolving market. In any event, the Monitor, CRO, Pride Entities, and Mitsubishi (as a Recourse Lender who will look to proceeds from the sale of assets of the Pride Entities at the end of the day) all submit that there is an expectation that there could well be an excess of equity from Receivership Properties of the Pride Entities after the payment in full of property-specific mortgagees and the DIP Syndicate.

[26] It makes good practical sense for the existing court officers, the Monitor and the CRO, to oversee the sale of those Properties in which many parties have interests or potential interests (in the Properties or the net proceeds from the sale thereof). The Monitor and the CRO may also require access to the Properties along the way to facilitate in advance the sales process.

[27] For all of these reasons, in my view, it is not practical, appropriate or cost-efficient, and it follows therefore that it is not just or convenient to appoint another court officer in the form of a receiver over these four Properties, notwithstanding that Richter is a well-qualified firm to act in that role.

[28] For all of these reasons, the motion is dismissed. However, and as noted at the outset of this Endorsement, the Monitor does not object, and the Pride entities do not object, to releasing the net amount of rents in respect of the Properties where counsel have confirmed the validity and enforceability of National’s mortgages and assignment of rents, to National, after accounting for direct costs in respect of the Properties which include taxes, repair and maintenance, utilities and GST/QST.

[29] In the anticipation that other creditors with mortgages on real property owned by the Pride Entities will seek relief similar to that sought by National today, just as the DIP Syndicate and BMO have indicated they will soon do, the Monitor will begin its analysis of the appropriate amounts of rent to be distributed, and will undertake security reviews with respect to the assignment of rents on the relevant Pride Entity. I agree that it should do so.

[30] For all of these reasons, I decline to grant the National Receivership Order, but grant the Rent Enforcement Order, with effect as of November 22, 2024.

[31] National has also sought a sealing order in respect of the four appraisals described above. The sealing order is limited, both as to scope and temporally. I am satisfied that the factors set out by the Supreme Court of Canada in Sierra Club and refined in Sherman Estate are met here, since the appraisals, if made public now, and pending the closing of a final sale transaction for each of the Properties, could clearly but negatively affect any sales and marketing process (including the current one) for any and all of these Properties. The sealing order is granted, and the materials are sealed, subject to further order of this Court.

[32] Orders to go to give effect to these Reasons.

Osborne J.