The long-awaited and highly anticipated decision of the Supreme Court of Canada in the Indalex case was released today. The decision stems from an appeal of an Ontario Court of Appeal decision dealing with a priority dispute between a court-ordered debtor-in-possession (DIP) charge granted under the Companies’ Creditors Arrangement Act (Canada) (CCAA) and a deemed trust for a wind-up pension deficiency asserted under the Pension Benefits Act (Ontario)(PBA).
This bulletin is a cross-country update presented by the national Restructuring & Insolvency Group. It discusses the key cases across the country involving debtor-inpossession (DIP) financing, court-ordered charges and other priority claims and disputes in recent Canadian insolvency proceedings.
Introduction
The effects of the recent fi nancial crisis and the ensuing recession continue to take their toll on municipalities in the United States, which are struggling with reduced revenues at the same time their residents have an increased need for government services.
Section 8 of the Interest Act (Canada) (the Act) was considered by the Ontario Superior Court of Justice in Grant Forest Products Inc. (Re) in the context of an inter-creditor dispute.
"Does an insurance broker, after procuring an insurance policy for a developer on a construction project, owe a duty to apprise a subcontractor that was later added as an insured under that policy of the insurance company's subsequent insolvency?"
In this issue of first impression in California, the Fourth District Court of Appeals said "no." Pacific Rim Mechanical Contractors, Inc. v. Aon Risk Insurance Services West, Inc. --- Cal.Rptr.3d ----,2012 WL 621346 (Cal.App.4 Dist.).
In the recent case of RadLAX Gateway Hotel, LLC v. Amalgamated Bank, 2012 WL 1912197 (May 29, 2012), the Supreme Court in a unanimous 8-0 opinion, delivered by Justice Scalia, held that the Bankruptcy Code statutory scheme mandates that secured creditors must be allowed to credit-bid in 363 sales of assets where the sale is incorporated into a plan of reorganization.
On May 15, 2012, the Eleventh Circuit Court of Appeals issued a fraudulent transfer ruling in TOUSA, Inc.'s chapter 11 case with wide-ranging implications for the financing community. As discussed herein, this decision weakens protections for secured lenders, especially when extending credit to distressed borrowers.
This discussion is being provided to our clients and friends to analyze the challenges presented in this difficult economic environment when an FDICinsured institution experiences a capital difficulty and is directed by the Banking Regulators1 to restore the institution's capital adequacy.2 In the past four years, the FDIC has closed approximately 400 insured institutions—as of January 1, 2012, the FDIC has indicated that there were over 800 banks on its "problem bank list." The difficulties experienced by many of these institutions are summarized in this analysis—
In Re Indalex Limited, the OCA surprised insolvency, pension and financial services professionals by ruling that pension plan deficiency claims can have priority over the claims of DIP lenders in the context of Companies’ Creditors Arrangement Act proceedings.
On Thursday, December 1, 2011, a three-judge panel of the Supreme Court of Canada granted leave to appeal from the decision of the Court of Appeal for Ontario in Re Indalex.