In In re Young Broadcasting, Inc., et al., 430 B.R. 99 (Bankr. S.D.N.Y. 2010), a bankruptcy court strictly construed the change-in-control provisions of a pre-petition credit agreement and refused to confirm an unsecured creditors' committee's plan of reorganization, which had been premised on the reinstatement of the debtors' accelerated secured debt under Section 1124(2) of the Bankruptcy Code.

Although originating from equity, declared but unpaid dividends have historically been treated as debt claims by courts in proceedings under the Companies’ Creditors Arrangement Act (CCAA).1 Following the coming into force of the CCAA amendments in September 2009, a fresh look at the characterization of claims as debt or equity is being undertaken.

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On April 7, 2011, the Ontario Court of Appeal rendered a decision in the restructuring proceedings involving Indalex Limited (Indalex) under the Companies’ Creditors Arrangement Act (CCAA) that is inconsistent with prior non-binding comments by the same court relating to the priority of certain pension claims. The decision has material implications for institutional financiers that lend against the inventory, accounts receivable or cash collateral of businesses with Ontario regulated defined benefit pension plans and for the access of those businesses to secured credit.

On February 11, 2011, the Hon Alan Gold of the United States District Court for the Southern District of Florida issued a 113 page opinion and order quashing the bankruptcy court's order requiring the lenders involved in TOUSA, Inc.'s Transeastern joint venture to disgorge, as fraudulent transfers under Section 548 of the Bankruptcy Code, settlement monies that they had received on July 31, 2007 in repayment of their existing debt and to pay prejudgment interest on such monies, for a total disgorgement in excess of $480 million.

1 Loranger v Jones, 184 Cal App 4th 847 (3d Dist May 2010)

Jones, a licensed contractor, had a workers' compensation policy covering his employees. Jones unknowingly used an unlicensed subcontractor and knowingly permitted two minors without work permits, and another person without a contractor's license, to help perform work for Loranger. Loranger refused to pay the final invoice and Jones filed suit for breach of contract. Loranger cross-complained alleging defects and sought disgorgement of monies paid.  

A decision out of the District Court for the Middle District of North Carolina (the “District Court”), now being appealed to the Fourth Circuit Court of Appeals, highlights just how critical it is for lenders to strictly comply with local recording requirements when recording their liens. In SunTrust Bank N.A. v. Northen, 433 B.R. 532 (M.D.N.C. Aug.

On December 16, 2010, the Supreme Court of Canada determined that in Companies’ Creditors Arrangement Act (“CCAA”) reorganization proceedings, the Crown enjoys no super-priority status in relation to its claims for unremitted sales taxes arising under the Goods and Services Tax (the “GST”) or similar provincial sales taxes.

The aggregate costs associated with a formal court-supervised insolvency proceeding can be substantial. In Canada, the obligation to pay these restructuring costs are typically secured by court-ordered charges over all of the property of the debtor and can rank in priority to the liens of secured creditors in the same collateral. As a result, these costs can have a material impact on the ultimate net recovery received by creditors. But how is the burden of these costs shared among secured creditors?

In the recent decision in Re Xerium Technologies Inc.1, the Ontario Superior Court of Justice recognized an order made by the U.S. Bankruptcy Court for the District of Delaware that confirmed the debtor’s pre-packaged Chapter 11 plan of reorganization. The decision provides useful guidance on how the Ontario Court may consider similar applications in the future. Many will take comfort from the fact that the decision revisits a number of relevant factors established in case law that pre-dates the current formulation of the cross-border provisions that make up Part IV of the CCA A.