Page 15 - Corporate Restructuring & Bankruptcy

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Corporate Restructuring & Bankruptcy | MONDAY, JUNE 13, 2016 | S15
4. CHAPTER 11 AND CCAA: ... AND DEFINITELY DIFFERENT!
Despite the similarities, there are also some important differences between Chapter 11 and the CCAA. Most notably, the CCAA is a flexible, court-driven process, one that is much less codified and with more discretion given to the supervising judge. CCAA court motions are often served and heard on a much quicker timeline than is typical in a Chapter 11 filing.
One unique CCAA feature is that the court must
appoint a “monitor” to oversee the company during
the restructuring. Although the monitor may be given additional powers by court order, the monitor is typically not in possession or control of the company, but rather positioned as the court’s eyes and ears. A monitor must be a licensed insolvency trustee (under applicable Canadian law) and free from conflicts. The court will look to the monitor for recommendations on matters brought to the court for approval.
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Although ad hoc bondholder committees are common
in CCAA proceedings, the CCAA does not provide for any official committee of unsecured creditors. In many respects the role of the monitor is intended to ensure unsecured creditors’ rights are taken into account.
5. FINALLY: CONSULT AN EXPERIENCED ADVISOR
When a restructuring spans the U.S.-Canada border, ensuring that all available options are considered and having the right strategy in place is critical. Understanding in detail the benefits and limitations of a full CCAA proceeding versus a recognition proceeding, and differences between the CCAA and Chapter 11, is essential to delivering the best possible outcome.
As neighbors, we live on either side of the world’s longest undefended border. Nevertheless, when dealing with a distressed enterprise that has operations in both countries, you must have access to advisors who have experience with the different insolvency regimes and appreciate both the similarities and the differences to help you find the right solution.
The Cassels Brock Restructuring and Insolvency Group offers decades of collective experience and advises on all aspects of reorganizations and restructurings. We have a highly regarded profile in international markets and frequently represent U.S.-based clients in Canadian and cross-border restructurings and insolvencies.
Learn more about us at www.casselsbrock.com, or contact any of our team members:
Joseph J. Bellissimo | 416 860 6572 | [email protected] Jane Dietrich | 416 860 5223 | [email protected]
Steven Dvorak | 604 691 6121 | [email protected]
Larry Ellis | 416 869 5406 | [email protected]
Ryan Jacobs | 416 860 6465 | [email protected]
Natalie E. Levine | 416 860 6568 | [email protected] Shayne Kukulowicz | 416 860 6463 | [email protected] Matthew Nied | 604 283 1482 | [email protected]
Kristin Taylor | 416 860 2973 | [email protected]
David Ward | 416 869 5960 | [email protected]
Michael Wunder | 416 860 6484 | [email protected]
There are numerous other differences between the two statutes. For example:
• In a CCAA filing, the concept of “cram down” does not exist. If a class of creditors does not vote to accept a plan, the plan will not be binding on that class (even if it is accepted by another class with a higher priority).
• Nuances regarding post-petition (or as we say in Canada, post-filing) financing may also be important, depending on the situation. Under the CCAA, the court cannot grant a priority charge to secure pre-existing obligations (limiting the availability of “roll-up” DIPs). However, there is no strict concept of adequate protection and thus priming existing secured creditors has a different dynamic. Prejudice to secured creditors is one of a number of factors a CCAA court is to take into account when determining if approval of debtor in possession financing with a priority charge is appropriate.
• Key employee retention/incentive programs may be subject to different limitations.
• Under the CCAA, a collective bargaining agreement cannot be disclaimed (or rejected, in U.S. parlance).
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New York Law Journal, June 2016
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