Two recent Supreme Court of Canada decisions demonstrate that the corporate attribution doctrine is not a one-size-fits-all approach.

Liability management transactions which may favour a subset of creditors over another are increasingly common in the US leveraged finance markets. 2024 may be seen as the year in which these US imports began to make a real impact in Europe. Which strategies could creditors employ to protect themselves from unfavourable treatment where such transactions are attempted?

In the current market, investors are increasingly considering their options in relation to the stressed and distressed credits in their portfolios. Whilst mindful of stakeholder relationships, secured lenders may, in some circumstances, wish to consider the "nuclear option": enforcing their share pledge over a holding company of the operating group (ideally, such pledge being over a single company which directly or indirectly holds the entire business - a "single point of enforcement").

Senior secured creditors, being the anchor creditor in the capital stack, will always be focused on ensuring their priority claim is as robust as possible, with clearly delineated capacity for 'super priority' debt. However, today's documentary flexibilities, coupled with local legal restrictions, can mean senior secured creditors are not as 'senior secured' as they think. Here are some points to think about.

Super Senior Debt

Court approval of a sale process in receivership or Bankruptcy and Insolvency Act (“BIA”) proposal proceedings is generally a procedural order and objectors do not have an appeal as of right; they must seek leave and meet a high test in order obtain it. However, in Peakhill Capital Inc. v.

Rises in energy costs, disruption to global supply chains, the situation in Ukraine, soaring inflation and higher interest rates are pushing several major European economies towards recession. Borrowers and issuers in the leveraged loan and high yield markets are feeling the impact and the benign refinancing conditions of 2021 are long gone. The natural consequence is rising default rates – S&P's global corporate default count for 2022 surpassed 2021's year-to-date tally during September.

The High Court decision in Re All Star Leisure (Group) Limited (2019), which confirmed the validity of an administration appointment by a qualified floating charge holder (QFCH) out of court hours by CE-Filing, will be welcomed.

The decision accepted that the rules did not currently provide for such an out of hours appointment to take place but it confirmed it was a defect capable of being cured and, perhaps more importantly, the court also stressed the need for an urgent review of the rules so that there is no doubt such an appointment could be made.

In certain circumstances, if a claim is proven, the defendant will be able to offset monies that are due to it from the claimant - this is known as set off.

Here, we cover the basics of set off, including the different types of set off and key points you need to know.

What is set off?

Where the right of set off arises, it can act as a defence to part or the whole of a claim.

In our update this month we take a look at some recent decisions that will be of interest to those involved in insolvency litigation. These include:

Creditor not obliged to take steps in foreign proceedings to preserve security