The Supreme Court of Canada (“SCC”) recently released its much-anticipated decision in the Indalex Limited (“Indalex”) proceedings under the Companies’ Creditors Arrangement Act (the “CCAA Proceedings”). The decision is important for secured lenders in the context of an insolvency proceeding (“DIP Lenders”) or outside of an insolvency proceeding (“secured lenders”).
The Supreme Court of Canada’s decision in the case of Re Indalex Ltd. [2013] SCC 6 (the “Decision”) does not, as one national newspaper put it place “creditors before pensioners”. The Decision which overturned the Ontario Court of Appeal’s decision in Re Indalex Ltd. [2011] O.J. No.
The Supreme Court issued one judgment this week in a case of interest to Canadian businesses and professions.
On Friday, the Supreme Court of Canada handed down its decision in the landmark pension/insolvency case, Sun Indalex, LLC v. United Steelworkers.
Introduction
The Supreme Court has issued its much-anticipated decision in Sun Indalex Finance, LLC v. United Steelworkers.
The Supreme Court of Canada’s decision in (Re) Indalex has changed the landscape for both lenders and borrowers in Canada who sponsor registered defined benefit pension plans. For lenders, carefully drafted loan documentation and effective planning can enhance the protection of a secured lender’s position in the face of the broadened scope of a deemed trust applicable to a borrower’s defined benefit pension obligations.
On February 1, 2013, the Supreme Court of Canada released its decision in Sun Indalex Finance, LLC v. United Steelworkers[1]. The ruling:
On Friday, February 1, 2013, the Supreme Court of Canada released its highly anticipated decision in Indalex Limited (Re). The ruling stemmed from an appeal of an Ontario Court of Appeal decision that had created commercial uncertainty for financing transactions. The primary issue for lenders was a priority dispute between a court ordered super-priority charge granted to a lender that had provided “debtor-in-possession” (DIP) financing under the Compan
Indalex Limited ("Indalex") was the sponsor and administrator of two underfunded defined benefit pension plans – one for salaried employees and one for executives. The salaried plan was in the process of being wound up.
On February 1, 2013, the Supreme Court of Canada (SCC) released its decision in Sun Indalex Finance, LLC v. United Steelworkers (Re Indalex). With respect to one critical issue,the SCC confirmed that a court-ordered debtor-in-possession (DIP) charge had priority over a deemed trust (akin to a statutory security interest) securing the debtor's obligation to fund a pension wind-up deficiency on the wind-up of a defined benefit (DB) pension plan.