Borrower beware: in times of distress, your credit documents may give your secured lenders an opportunity to “flip” control of your board

Distress happens, even at companies that once appeared financially solid. When it does, the company, its board (which may be controlled by a sponsor in a public or private equity scenario), and its lenders often enter into restructuring discussions in search of a consensual path forward, typically under the terms of a forbearance agreement.

This significant recent decision of the Supreme Court of Canada confirms (i) that a CCAA supervising judge enjoys broad discretion and the necessary jurisdiction to prevent a creditor from voting on a plan of arrangement when the creditor is acting for an improper purpose, and (ii) that litigation funding is not intrinsically illegal and that a litigation funding agreement can be approved by the Court as an interim financing in insolvency.

Cette importante décision prononcée dernièrement par la Cour suprême du Canada confirme : (i) que le juge chargé d’appliquer la LACC possède un vaste pouvoir discrétionnaire et la compétence nécessaire pour empêcher un créancier de voter sur un plan d’arrangement s’il agit dans un but illégitime, (ii) que le financement de litiges n’est pas intrinsèquement illégal et qu’un accord de financement de litige peut être approuvé par la Cour à titre de financement temporaire en situation d’insolvabilité.

This significant recent decision of the Supreme Court of Canada confirms (i) that a CCAA supervising judge enjoys broad discretion and the necessary jurisdiction to prevent a creditor from voting on a plan of arrangement when the creditor is acting for an improper purpose, and (ii) that litigation funding is not intrinsically illegal and that a litigation funding agreement can be approved by the Court as an interim financing in insolvency.

A three-judge panel of the U.S. Court of Appeals for the Fifth Circuit has voided its previous near explicit declaration that make-whole provisions are always unmatured interest, and therefore subject to disallowance under section 502(b) of the Bankruptcy Code in Ultra Petroleum.

Judge Drain has now issued a long-awaited Order on Remand from the Second Circuit’s decision in Momentive Performance Materials determining the appropriate cramdown interest rate applicable to replacement notes issued by Momentive.

The High Court of Hong Kong refused to allow a Chapter 11 Trustee to disclose a Decision from Hong Kong winding up proceedings in the US bankruptcy court. The US proceedings were commenced to prevent a creditor from taking action following a breach of undertakings given to the Hong Kong court in circumstances where the company had no jurisdictional connection with the US.

Following our previous article, the Court of Appeal dismissed an appeal following the High Court deciding that a moratorium in relation to restructuring proceedings in Azerbaijan could not be extended in breach of the Gibbs rule, allowing two significant creditors to proceed with their claims in the English Courts.

• On November 8, 2018, the Supreme Court of Canada (“SCC”) reversed the Federal Court of Appeal decision in Callidus Capital Corporation v.

• Dans son arrêt du 8 novembre 2018, la Cour suprême du Canada a infirmé la décision de la Cour d’appel fédérale (Callidus Capital Corporation c.