A year after the uncertainty created in the Canadian corporate debt financing world by the Ontario Court of Appeal's pensions-friendly decision in the Indalex CCAA restructuring matter2, the Quebec Superior Court, in April 2012, determined in a lengthy and well-reasoned decision that the key restructuring and pensions law principles underpinning Indalex do not apply in Quebec when considering the treatment of defined benefit amortization payment and deficit claims in a restructuring.
On May 29, 2012, in RadLAX Gateway Hotel, LLC v. Amalgamated Bank, the United States Supreme Court unanimously held that a debtor may not confirm a chapter 11 plan of reorganization providing for the “free and clear” sale of a secured creditor’s collateral, without permitting the secured creditor to credit bid at the sale.
In a case of first impression, a U.S. bankruptcy court charged with enforcing the rights of a foreign insolvency administrator against assets in the United States has held that foreign insolvency law may not be invoked to cancel the rights of licensees of U.S. patents.
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In Canada legislative authority is divided between the federal and provincial governments by subject matter. "Bankruptcy and insolvency" is a matter of federal jurisdiction, while "property and civil rights" is generally within the jurisdiction of the provinces.
On September 13, 2011, Judge Mary F. Walrath of the United States Bankruptcy Court for the District of Delaware granted standing for an equity committee in In re Washington Mutual, Inc. (“WaMu”) to seek “equitable disallowance” of claims held by noteholders that had traded claims after engaging in negotiations with WaMu over the terms of a global restructuring.
In chapter 11 bankruptcy cases, creditors and equity holders with common interests often find it advantageous to pool resources and form an ad hoc group or committee. Because the committee represents a larger amount of claims or interests, it speaks with more authority in the bankruptcy case, and the members are able to save money by sharing the cost of legal and financial advisors.
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 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.