Cow Harbour Construction Ltd1

introduction

The 2009 amendments to the Companies’ Creditors Arrangement Act (Canada) (the “CCAA”) and the Bankruptcy and Insolvency Act (Canada) codified with some modifications judge made law giving a court authority to grant super-priority priming liens to secure interim financing (or debtorin- possession financing).

Once a company files a Chapter 11 bankruptcy petition (to sell its assets, reorganize or liquidate), Bankruptcy Code § 1114 sets forth a detailed procedure for the employer to follow to modify or terminate certain retiree benefits. Among other things, § 1114 imposes on the employer the burden of showing that the elimination or modification of benefits is necessary to permit reorganization.

An increasing number of restructuring cases involve several creditors with security over varied assets or asset classes. In such cases there is often a dispute over allocation of the costs of the reorganization. This is particularly true in failed restructurings where costs are high and realizations are low.

Ontario Court Stays Retaliatory Action brought against Bank

Financial institutions seeking to enforce a debt or guarantee through bankruptcy or other court proceedings are sometimes faced with meritless retaliatory court actions brought by debtors attempting to frustrate or further delay payment. In general, Ontario courts will not compel parties to litigate the same dispute on multiple fronts. Instead, one proceeding will be temporarily stayed pending resolution of the other where the same core issues are raised in both.

This paper is designed to provide a brief update of recent decisions of note that concern various ethical issues bankruptcy attorneys often encounter, focusing on conflicts of interest and privilege issues.

Debt for Equity Exchanges Outside Bankruptcy

The recession has highlighted a new risk for borrowers – the risk that a lender will be insolvent and default on its obligation to fund loans under the credit agreement. This has created unexpected issues under credit agreements, which were written at a time when lender insolvency was not a perceived risk.”34

If you intend to enforce a judgement in Canada, you should know that the question of the US Court’s jurisdiction will likely be determined by the Canadian Court enforcing the judgement using its own test. The grounds on which the US Court took jurisdiction will carry little weight in the eyes of the Canadian enforcing Court.

The recent case of Mervyn’s LLC v Lubert-Adler Group IV, LLC, et al. (In re Mervyn’s Holdings, LLC),1 serves as a warning to sellers and equity firms participating in leveraged buyouts to be wary of the effect such buyouts will have on creditors of the target company.

On March 22, 2010, the Third Circuit released its long-awaited ruling in the Philadelphia Newspapers case regarding the applicability of credit bidding.