The Supreme Court of Canada, in a decision that has implications for borrowers and lenders alike, particularly where pension funds are involved, has raised some new hurdles for the country’s banks and their business customers and, at the same time, has bolstered protection for lenders of last resort who finance insolvent companies.

The court’s decision in Sun Indalex Finance, LLC v. United Steelworkers, issued earlier this year, addresses critical questions in insolvency law regarding pension funds and DIP financing. 

Section 506(a) of the Bankruptcy Code contemplates bifurcation of a debtor's obligation to a secured creditor into secured and unsecured claims, depending on the value of the collateral securing the debt. The term "value," however, is not defined in the Bankruptcy Code, and bankruptcy courts vary in their approaches to the meaning of the term. In In re Heritage Highgate, Inc., 679 F.3d 132 (3d Cir.

The ability to sell an asset in bankruptcy free and clear of liens and any other competing “interest” is a well-recognized tool available to a trustee or chapter 11 debtor in possession (“DIP”). Whether the category of “interests” encompassed by that power extends to potential successor liability claims, however, has been the subject of considerable debate in the courts. A New York bankruptcy court recently addressed this controversial issue in Olson v. Frederico (In re Grumman Olson Indus., Inc.), 445 B.R. 243(Bankr. S.D.N.Y. 2011).