On Friday, the Supreme Court of Canada handed down its decision in the landmark pension/insolvency case, Sun Indalex, LLC v. United Steelworkers.
Introduction
The Supreme Court has issued its much-anticipated decision in Sun Indalex Finance, LLC v. United Steelworkers.
The Supreme Court of Canada’s decision in (Re) Indalex has changed the landscape for both lenders and borrowers in Canada who sponsor registered defined benefit pension plans. For lenders, carefully drafted loan documentation and effective planning can enhance the protection of a secured lender’s position in the face of the broadened scope of a deemed trust applicable to a borrower’s defined benefit pension obligations.
On February 1, 2013, the Supreme Court of Canada released its decision in Sun Indalex Finance, LLC v. United Steelworkers[1]. The ruling:
On Friday, February 1, 2013, the Supreme Court of Canada released its highly anticipated decision in Indalex Limited (Re). The ruling stemmed from an appeal of an Ontario Court of Appeal decision that had created commercial uncertainty for financing transactions. The primary issue for lenders was a priority dispute between a court ordered super-priority charge granted to a lender that had provided “debtor-in-possession” (DIP) financing under the Compan
The Supreme Court of Canada released its highly anticipated decision in Indalex Limited (Re) this morning. The ruling stemmed from an appeal of an Ontario Court of Appeal decision that had created commercial uncertainty among many participants in the financial services, pensions and restructuring industries.
Pension and insolvency lawyers have been waiting with great anticipation for the Supreme Court of Canada to rule in Indalex. The decision was released on February 1, 2013 and represents a major statement by Canada’s top court on the intersection of pension and insolvency law.
“Insolvency can trigger catastrophic consequences”.
So begins the epic decision released this morning by the Supreme Court of Canada in Sun Indalex Finance, LLC v United Steelworkers, 2013 SCC 6 – a case that considers the impact of insolvency on the employee beneficiaries to a pension plan.
In (Re) Indalex, the Supreme Court of Canada (SCC) affirmed the super-priority of the security granted to a debtor-in-possession (DIP) lender, over a deemed trust created under provincial pension legislation, in the context of a Companies’ Creditors Arrangement Act (CCAA) proceeding. The SCC’s analysis leaves open further issues.
On February 1, 2013, the Supreme Court of Canada (SCC) released its long-awaited decision in Sun Indalex Finance, LLC, et al. v. United Steelworkers, et al., 2013 SCC 6.
The SCC has affirmed that priority charges created by courts in insolvency proceedings supersede provincial statutory deemed trusts for pension claims.
The SCC decision is welcome news for “debtor-in-possession” (DIP) lenders, who questioned their priority position in the face of the Ontario Court of Appeal judgment in this proceeding, which reached the opposite conclusion.