Education publishing company obtained protection under Companies’ Creditors Arrangement Act. Bank was one of 22 first lien lenders, second lien lender and agent for second lien lenders. Credit bid for sale of substantially all assets to newly incorporated entity owned by first ranked secured lenders, if approved, would results in second lien lenders receiving nothing on outstanding loans. Company brought motion for approval of sale; bank brought motion for order that amounts owing to it and portion of consent fee be paid by company prior to sale. Company’s motion granted; bank’s motion dismissed. Normally, sale process is undertaken after court approves proposed sale methodology with monitor participating in process and reporting to court. While none of this occurred, sale or investment sales process (SISP) and credit bid sale transaction met requirements of CCAA. Sales process was typical and consistent with processes that had been approved by court in many CCAA proceedings. Results of process showed that no interested parties could offer price sufficient to repay amounts owing to first lien lenders. Intercreditor agreement governed, and led to conclusion that order in favour of bank as second lien agent was not appropriate as payment would reduce collateral subject to rights of first lien lenders in that collateral.
Nelson Education Ltd., Re (Sep. 8, 2015, Ont. S.C.J. [Commercial List], Newbould J., File No. CV15-10961-00CL) 258 A.C.W.S. (3d) 465.