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
Indalex Limited ("Indalex") was the sponsor and administrator of two underfunded defined benefit pension plans – one for salaried employees and one for executives. The salaried plan was in the process of being wound up.
On February 1, 2013, the Supreme Court of Canada (SCC) released its decision in Sun Indalex Finance, LLC v. United Steelworkers (Re Indalex). With respect to one critical issue,the SCC confirmed that a court-ordered debtor-in-possession (DIP) charge had priority over a deemed trust (akin to a statutory security interest) securing the debtor's obligation to fund a pension wind-up deficiency on the wind-up of a defined benefit (DB) pension plan.
On February 1, the Supreme Court of Canada (the “SCC”) released its long-awaited decision in Sun Indalex Finance, LLC v. United Steel Workers. 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 priority of pension claims in Companies’ Creditors Arrangement Act (the “CCAA”) proceedings.
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.
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).
The Supreme Court of Canada overturned the Ontario Court of Appeal today in what is one of the most highly-anticipated cases for the pension and insolvency bars pending before the courts. In Indalex (Re) 2013 SCC 6, the court provided clarity regarding some key questions relating to the governance of an employer-administered pension plan during a proceeding under the Companies’ Creditors Arrangement Act (CCAA). The judges split on some of the issues, but here is our brief round-up: