Chapter 11 proceedings under United States Bankruptcy Code constituted foreign proceeding for purposes of Companies’ Creditors Arrangement Act (Can.)

Ontario civil | Bankruptcy and Insolvency

COURTS AND PROCEDURE

Chapter 11 proceedings under United States Bankruptcy Code constituted foreign proceeding for purposes of Companies’ Creditors Arrangement Act (Can.)

On January 15, 2015, CEOC Inc and certain of its subsidiaries commenced voluntary reorganization by filing petitions for relief in United States bankruptcy court in Illinois. On January 12, 2015, however, competing involuntary petition in respect of CEOC Inc, but not subsidiaries, had been filed in United States bankruptcy court in Delaware. By order of court in Delaware, Illinois proceeding stayed pending determination of appropriate venue. Meanwhile, CEOC Inc authorized CWE Ltd, indirect subsidiary incorporated in Ontario, who operated casino on behalf of Ontario Lottery and Gaming Corporation, to bring within application in Ontario. CWE Ltd only one of 173 chapter 11 debtors not incorporated in US jurisdiction. With authorization of sole shareholder, CWE Ltd applied under Companies’ Creditors Arrangement Act (Can.) (CCAA) for Initial Recognition Order recognizing Illinois proceeding as foreign main proceeding, declaring CWE Ltd to be foreign representative and staying proceedings against all chapter 11 debtors. CWE Ltd also applied for Supplemental Order recognizing in Canada and enforcing certain first day orders made in Illinois proceeding (permitted under Delaware stay order), staying any claims, rights, liens or proceedings against or in respect of chapter 11 debtors, their business and property, officers and directors and restraining any person or entity from discontinuing supply of products or services to chapter 11 debtors. CWE Ltd intended to continue operating casino throughout chapter 11 proceeding. There was no intention to restructure business or operations, or to compromise any obligations. Application allowed. Chapter 11 proceedings under United States Bankruptcy Code constituted foreign proceeding for purposes of CCAA. Under s. 45(1) of CCAA, foreign main proceeding was foreign proceeding in debtor’s “centre of main interest”. Given location of other 172 chapter 11 debtors, and manner in which subsidiaries operated, that was United States. Chapter 11 proceeding should be recognized as foreign main proceeding. Foreign representative did not have to be appointed by court. Authorization by CEOC Inc and own shareholder enough to give CWE Ltd such status. In order to maintain status quo and protect assets of chapter 11 debtors, and allow CWE Ltd to continue with business as usual during chapter 11 proceeding, relief sought in Supplemental Order should also be granted except with respect to stay of actions against officers and directors.
Caesars Entertainment Operating Co., Re (Jan. 19, 2015, Ont. S.C.J., G.B. Morawetz R.S.J., File No. CV-15-10837) 251 A.C.W.S. (3d) 553.

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