Our Montreal and Toronto offices are representing FTI Consulting Canada Inc., the monitor, in the CCAA proceedings of Bloom Lake General Partner Limited, the related parties, as well as Wabush Mines, an unincorporated joint venture of Wabush Iron Co. Limited and Wabush Resources Inc.
The CCAA proceedings initiated in 2015 are still ongoing. Substantially all the assets of the debtor companies were sold through approximately 20 sale transactions that were each approved by the CCAA Court overseeing the proceedings.
A number of Wabush Mine employees were sponsored by two multi-jurisdictional benefit plans which were cancelled upon the commencement of the CCAA proceedings. The plans covered employees reporting to work in the provinces of Newfoundland and Quebec in addition to employees working in federal jurisdictions. The monitor presented a motion with directions to settle complex priority issues, including the interaction and interplay of insolvency law and pension laws in Newfoundland, Quebec and federal legislation, each providing distinct protections. The jurisdiction of the CCAA Court was disputed and eventually a reference was presented before the Newfoundland Court of Appeal. The decision affirming the CCAA Court’s jurisdiction to act on the complex priority issues offers a useful guide for future multi-jurisdictional disputes. This is the first reported case dealing with the proper interpretation of the applicable multi-jurisdictional agreements in ascertaining the entitlement of different employee groups pursuant to distinct pension legislation in an insolvency context.
The decision rendered by Justice Stephen W. Hamilton (now with the Quebec Court of Appeal) on pension priorities is a key and novel decision affirming that in CCAA liquidations, protection for unpaid contributions to defined benefit plans in the event of distribution to creditors is limited to unpaid normal costs as provided by Section 6(6) CCAA.
The monitor reviewed, among other things, intercompany funding and a complex, multi-stage corporate reorganization that had the effect of reducing intercompany indebtedness of the CCAA debtor in consideration for the transfer of cash and certain notes, as well as shares in certain operating Australian subsidiaries. These issues were ultimately settled through a settlement implemented in a plan of compromise and arrangement.
The monitor negotiated a settlement as part of a plan of arrangement to which non-filed affiliates would contribute for the benefit of arm’s length creditors in exchange for releases to resolve complex intercompany transactions. The plan also resolved the pension disputes then pending before the Quebec Court of Appeal and the Supreme Court of Canada. The plan, as amended, was approved by the creditors, received Court sanction and was implemented on July 31, 2018. A first interim distribution was made to the creditors in the fall 2018.
The monitor successfully negotiated and implemented with Canadian tax authorities a novel protocol to review and approve proposed tax withholdings without delaying distributions to the creditors. The monitor is now contemplating proceeding with a second distribution pending the final resolution of outstanding tax issues.
The team is led by Sylvain Rigaud and includes Evan Cobb, Derek Chiasson, and Arad Mojtahedi.