Canada

Nortel Networks Corp.’s former employees and pensioners asked a Canadian judge to order the insolvent telephone-equipment maker to pay them benefits including severance and pension supplements, Bloomberg reported. The company filed for bankruptcy in January in the U.S. and Canada after losing almost $7 billion since 2005. Toronto-based Nortel ceased paying former workers some pension benefits and refused severance and termination payments, saying under bankruptcy protection those are unsecured claims.

As Barack Obama, the U.S. President, eyes a "quick and surgical" bankruptcy solution for ailing automakers, don't expect the wound in Canada to be as clean or neat should car companies here seek creditor protection under the Companies' Creditors Arrangement Act (CCAA). That's because of a difference in Canadian labour and insolvency law, the Financial Post reported. In the United States, insolvencies can be used to end high-cost union contracts if certain procedures are followed.

After a year of complex negotiations, Quebecor World Inc. has worked out a deal on the key terms of a restructuring plan with its major creditors and anticipates emerging from bankruptcy protection by mid-July, The Globe and Mail reported. The agreement marks the end of a troubled chapter for what was once a key company in the media and printing empire of Pierre Karl Péladeau, and will usher in changes such as recapitalization and deleveraging of the company, which filed for protection 14 months ago.

The wholly owned Canadian subsidiary of Indalex Inc. has initiated bankruptcy proceedings due to the pervasive decline in the global economy and the slide in demand for extruded aluminum products. Indalex Canada filed for protection under the Companies' Creditors Arrangement Act (CCAA), which is similar to Chapter 11 bankruptcy proceedings in the United States. The case will be heard in the Ontario Superior Court of Justice. The company last month filed for Chapter 11 protection for its U.S. operations.

The federal government says it wants to protect consumers and parts suppliers faced with a potential bankruptcy filing by General Motors of Canada or Chrysler Canada by backstopping their warranties on new car sales and bolstering support for the parts makers, The Globe and Mail reported. Worried that the companies' financial crisis will drive away customers and seal their fate, Industry Minister Tony Clement said Ottawa would insure the warranties of new GM and Chrysler vehicles sold between yesterday and the conclusion of their restructuring efforts.

How does Air Canada avoid CCAA? the Globe and Mail asks in an editorial that explores the replacement of president and CEO Montie Brewer with former Air Canada executive Calin Rovinescu. The airline says it can draw more equity out of its fleet by refinancing the planes. There are in fact new agreements in place to do just that. There's also talk of the government changing the pension rules and giving companies more breathing room. Most airline watchers seem to think that these and other factors mean Air Canada won't ask a judge for creditor protection. Don't believe it.

Ottawa has set the stage for a clash between General Motors of Canada Ltd. and its union, after the federal government demanded more concessions from GM workers in return for up to $7.5-billion in restructuring assistance and the Canadian Auto Workers refused, The Globe and Mail reported.

Lawyers say debtor-in-possession financing (DIP)--the backbone of formal restructuring proceedings under the Companies' Creditors Arrangement Act (CCAA)--is difficult to obtain, partly because financial institutions accustomed to providing such facilities face their own financial troubles, the Financial Post reported. Since the 1990s, CCAA filings have been the preferred legal avenue by which companies such as Eaton's, Air Canada, Stelco and Abitibi bought time necessary to continue operations while they restructured. That's changing.

Beleaguered AbitibiBowater Inc. is facing down an imminent bankruptcy filing as early as this week after the newsprint giant blew past a deadline given by a contingent of secured U.S. lenders to come up with a suitable plan to restructure a multibillion-dollar debt load, the Financial Post reported. The Montreal-based company had until midnight Friday to reach an accord with lenders which included Bank of America, Citicorp and Wachovia Corp. that would allow Abitibi to proceed with a plan to restructure US$1.8-billion in debt at American subsidiary Bowater Inc.

As companies try to hasten the restructuring process, they're negotiating deals with creditors before they reach the courts, an analysis by the Globe and Mail has found. Restructuring experts say this carefully crafted strategy is increasingly the norm as companies attempt to prenegotiate agreements with most of their major creditors, then file under the Companies' Creditors Arrangement Act in Canada or Chapter 11 in the United States just long enough to have a court impose terms on any unwilling lenders.