When large corporations encounter financial distress, they often turn to the Companies’ Creditors Arrangement Act (CCAA)—a federal act to restructure their financial affairs. Some of Canada’s largest companies, such as Nortel Networks, U.S. Steel Canada (aka Stelco) and Sears Canada have filed for protection under CCAA and Farber has played a significant role in each of these cases, on behalf of large stakeholders.
As part of the process, a company will apply to the court for protection under the CCAA and, in return, receive an initial 30 days of protection from creditors with extension often granted beyond the initial 30 days to provide time to formulate a potential plan of arrangement (CCAA plan) with the stakeholders.
During this time, the court will appoint an independent third party, referred to as a monitor, to assist with such matters as monitoring of the company’s ongoing operations and cash flow, communicating with key stakeholders and ultimately potentially filing a CCAA plan with the creditors. CCAA proceedings also allow for the:
- immediate relief from creditors,
- a forum for conducting a Sales and Investment Solicitations Process (SISP) to identify investors or buyers of the company’s business,
- Debtor in possession (DIP) funding which may be required to continue operations while a CCAA plan is formulated,
- the ability to disclaim or assign major contracts if deemed integral to a restructuring or sale of the business and
- provisions for a court-approved charge to cover off directors’ and officers’ liabilities to help retain such individuals through CCAA proceedings.
Role of the monitor
The role of the monitor is unique to Canadian restructuring proceedings. The monitor role can be extensive, ranging from assisting the company with preparation of cash flows and prescribed filing of the same, to the structuring of DIP loans, to assistance in formulating and conducting SISP. It can also be responsible for reporting on the progress of the restructuring to the court and all stakeholders, developing a CCAA plan and coordinating a creditors’ meeting to vote. In our role as monitor, Farber also provides valuable oversight and input into the course of any CCAA restructuring.
CCAA: Financial advisory roles
In large multi-party restructurings, various stakeholders or creditor groups will engage legal counsel and financial and other advisors to navigate the complex restructuring proceedings and ensure they have an effective voice in the proceedings. Farber has extensive experience acting as financial advisor in many of Canada’s largest restructurings. We have extensive expertise representing the pension and employee interests in these cases and support the pension administrator, the Pension Benefit Guarantee Fund and representative counsel. We support the legal teams with financial and business acumen and litigation support.