In the 2012 decision of SWP Industries Inc., Re, Justice McLellan of the Court of Queen’s Bench of New Brunswick (the “Court”) declined to lift the stay of proceedings one week in advance of its expiry, despite the assertion of material prejudice advanced by Bank of Nova Scotia (“BNS”).

The Supreme Court has boosted the rescue culture by ruling that Financial Support Directions (FSDs) issued by the UK Pensions Regulator after commencement of insolvency proceedings are not an expense of the administration and, instead, rank on a par with unsecured claims. This decision in the Nortel and Lehman administrations will be reassuring to creditors and insolvency and restructuring practitioners.

Key Points

It has long been standard practice for Court-appointed receivers, monitors and trustees in bankruptcy to include comprehensive disclaimer language in the reports they submit to Court in connection with insolvency proceedings. The reason is simple – these reports are relied on by the Court and other parties to the proceedings, and are often prepared using unaudited and unverified information obtained from management of the debtor company.

On April 2, 2013, Justice Mesbur of the Ontario Superior Court of Justice (Commercial List) granted an application brought by Business Development Bank of Canada (“BDC”) for the appointment of a receiver over the assets, undertakings and properties of Pine Tree Resort Inc. and 1212360 Ontario Limited, operating as the Delawana Inn in Honey Harbour, Ontario (together, “Delawana”).

In an important decision for private equity sponsors and other insiders who advance loans to their businesses, on April 30, 2013, the Ninth Circuit Court of Appeals in In re Fitness Holdings International confirmed that bankruptcy courts may recharacterize debt as equity, but held that recharacterization is determined by state law. In its ruling, the Ninth Circuit joins the U.S. Court of Appeals for the Fifth Circuit in deferring to state law on this issue and explicitly rejects the various federal law based tests that have been adopted by a majority of U.S.

On February 1, 2013, the Supreme Court of Canada (the “SCC”) released its long-awaited decision in Sun Indalex Finance, LLC v. United Steel Workers1 (“Indalex”). By a five to two majority, the SCC allowed the appeal from the 2011 decision of the Ontario Court of Appeal (the “OCA”) which had created so much uncertainty about the relative priorities of debtor-in-possession (“DIP”) lending charges and pension claims in Companies’ Creditors Arrangement Act (the “CCAA”) proceedings.

The Companies’ Creditors Arrangement Act¹ (the “CCAA”) is by far the most flexible Canadian law under which a corporation can restructure its business. When compared against theBankruptcy and Insolvency Act² (the “BIA”), the CCAA looks like a blank canvass and lends itself well to invention and mutual compromise.

The United States Bankruptcy Court for the District of Delaware recently upheld a secured lender’s claim for a $23.5 million “makewhole” premium (the “Makewhole Claim”) over the heavily litigated objection raised by the unsecured creditors’ committee in In re School Specialty, Inc., No. 13-10125 (KJC) (Apr. 22, 2013).

Chapter 11 of the U.S. Bankruptcy Code provides debtors with a number of tools to restructure comprehensively their debts and other liabilities as well as immediate protection from secured and unsecured creditors.