In a series of cases in 2009 culminating in the decision of the Honourable Mr. Justice Morawetz in Re Indalex Limited (“Indalex”), the CCAA Courts have considered the appropriateness of approving the granting of a guarantee in connection with a cross-border DIP facility. This issue has been at the forefront – with varying results – in a number of recent CCAA cases in which DIP financing was dependent on the CCAA debtor providing a secured guarantee of the obligations of the parent or affiliate company’s DIP financing in its own Chapter 11 case.
From modest beginnings, the concept of Cross-Border Insolvency Protocols as a means of enhancing cooperation between administrations in international cases has become an established practice in major cases. From their origins in the International Bar Association’s Cross-Border Insolvency Concordat through the early Protocols in Maxwell Communication and Everfresh Beverages, Protocols have become a mainstay in international reorganizations and restructurings.
Bankruptcy is a highly specialized legal practice area that can be difficult for the non-lawyer to navigate. Bankruptcy can also present many traps for the unwary. A bankruptcy or distressed financial situation will in most cases materially affect a company’s key relationships, customers, suppliers and business partners. All company decision makers need an understanding of how to react to protect their organization’s interests. Here are ten practical considerations to recognize in this distressed environment.
Retiree benefits are often a central issue in bankruptcy cases. For many employers the high cost of retiree medical benefits has been a significant contributing factor to the Chapter 11 filing and a matter of ongoing concern if the debtor is to be able to successfully reorganize. Understandably, employees, retirees and unions are equally concerned about the status of retiree benefits. Their obvious interest is to attempt to prevent the erosion of benefits that had been expected to be available during retirement.
A recent decision of the British Columbia Court of Appeal has rationalized the approach to be taken by Courts in considering appeals in CCAA cases.
The Alberta Court of Queen's Bench recently permitted a debtor to establish a "hardship" fund to pay obligations incurred prior to the debtor's CCAA filing to local suppliers operating in the debtor’s community.
As previously reported, the International Insolvency Institute will hold its Ninth Annual International Insolvency Conference at Columbia University in New York on June 18 and 19, 2009. This Conference is likely to be the finest international insolvency Conference of the year and has an exceptionally talented and prominent faculty that will address today’s critical international insolvency issues and developments. Among the highlights of the Conference are the following:
On April 8, 2009, the Second Circuit Court of Appeals issued a ruling that creates an additional hurdle for companies providing single-employer pension funds when seeking to reorganize through a bankruptcy. In general, the termination of a pension plan can give rise to a per-employee termination premium (a “Termination Premium”) owed by the company terminating the plan to the Pension Benefit Guaranty Corporation (“PBGC”), the quasi-governmental entity that insures pension plans.
Companies that engage in multiple transactions with different entities of related groups often enter into contractual netting agreements that allow the setoff of obligations between entities within the groups. The effectiveness of these agreements has been called into question by a recent decision of a bankruptcy court in Delaware, which refused to allow a party to a contractual netting agreement to offset its obligations to the debtors against obligations of the debtors under the netting agreement.