In a very recent decision, the U.S. District Court for the Southern District of New York determined that a negative inference to an exception to a negative covenant prevented a company from undertaking a proposed restructuring transaction. We find the case unique not because of the result necessarily, but rather because the court used the negative inference to override another express provision in the Credit Agreement.

Although there has been much discussion of the Second Circuit’s recent decision in Marblegate, this article addresses a question other commentators have yet to tackle: namely, how the Second Circuit’s decision impacts the Trust Indenture Act’s protection of guarantee obligations included in an indenture. Below we provide our view on how Marblegate affects indenture guarantees. More specifically, we discuss how the decision is consistent with provisions of the TIA that expressly protect a noteholder’s payment rights under a guarantee.

Synopsis

In Essar Steel Algoma Inc. (Re), Justice David Brown of the Ontario Court of Appeal held that the ambit of orders “made under” the Companies’ Creditors Arrangement Act, R.S.C. 1985, c. C-36 (the “CCAA”), and thus requiring leave to be appealed, is broad. Though concluding that the appellant in this case required leave to appeal, he nonetheless ordered the leave motion be expedited.

In his decision in Global Royalties Limited v. Brook, Chief Justice Strathy of the Ontario Court of Appeal explained that the Bankruptcy and Insolvency Act (“BIA”) does not provide a bankrupt with a right to appeal an order lifting a stay of proceedings against him. Despite there being a multi-party bankruptcy, he rejected the submission that “the order or decision is likely to affect other cases of a similar nature in the bankruptcy proceedings”.

Introduction

In Walchuk Estate v. Houghton, the Ontario Court of Appeal dismissed a motion to quash an appeal on the basis that the lower court’s adjournment of a contempt motion was a final order. The decision also provides guidance, yet again, on the proper test for distinguishing between final and interlocutory orders.

Background

The media have been paying considerable attention to the current financial distress of the energy industry in Alberta, focusing primarily on the impact a company’s financial condition can have on its stakeholders, including its employees, shareholders and creditors. But there is another group that is also being affected: counterparties to commercial arrangements with insolvent companies. Increasingly, financially strong companies are having to deal with insolvent joint venture partners, financially distressed operators, and bankrupt lessees.

On September 18, 2015, Margaret M. Okamoto (“Plaintiff”) filed a complaint (the “Complaint”) in The United States District Court for the District of Nevada alleging violations of the Fair Credit Reporting Act, 15 U.S.C. § 1681 et seq. (the “FCRA”), against, inter alia, Bank of America, N.A. (“BOA”), Mutual of Omaha Bank (“MOB”), and Experian Information Solutions, Inc. (collectively, “Defendants”).  See Okamoto v. Bank of America et al., No. 2:15-cv-01800-GMN-GWF (Sept. 18, 2015).

In a proceeding under the Companies’ Creditors Arrangement Act (“CCAA”), a judge has discretionary powers to, among other things, order debtor companies into bankruptcy and thereby resolve priority disputes. What should be the standard of review of such discretionary decisions? Historically, the standard has been high.

Following the Supreme Court of Canada decision in Sun Indalex Finance, LLC v. United Steelworkers, [2013] 1 S.C.R. 271 (Indalex), creditors and their advisors have been closely following jurisprudence which considers the scope of the decision.