Ontario Civil

Bankruptcy and Insolvency

Companies’ Creditors Arrangement Act

Initial application

Necessary and appropriate to grant stay of proceedings to preserve status quo among stakeholders

Debtor was incorporated to own and operate electrical co-generation facility and encountered difficulties retrofitting its facility, which resulted in energy output being lower and costlier than expected. Debtor was in default on various obligations and in litigation with former contractor. Debtor believed its underlying business was strong, but it required restructuring to inject new funds into its operations. Debtor was in negotiations with proposed DIP lender and creditor to reach agreement on SISP. Debtor brought application for initial order under Companies’ Creditors Arrangement Act (CCAA), with appointment of monitor, authorization to borrow $5,000,000 pursuant to DIP facility as interest financing, with maximum of $1.6 million advanced prior to comeback hearing, and sealing order. Application granted. Applicant was debtor company with over $5,000,000 in debts and was entitled to relief under CCAA. Debtor was insolvent and met threshold requirements under s. 10 of CCAA. It was necessary and appropriate to grant stay of proceedings to preserve status quo among stakeholders and allow SISP to unfold. It was necessary and appropriate to allow debtor to pay certain amounts, including pre-filing amounts to suppliers. Monitor requested by debtor consented to appointment and was appropriate. DIP lenders charge satisfied relevant criteria and was integral part of credit facility. Coverage for liability was extended to directors and officers since they did not have insurance. To protect integrity and fairness of process, sealing order was made.

Index Energy Mills Road Corporation (Re) (2017), 2017 CarswellOnt 13040, 2017 ONSC 4944, G.B. Morawetz R.S.J. (Ont. S.C.J.).


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