Exiting the BIA NOI Process Without a Proposal: Court Approves Company’s Withdrawal of Proposal After Return to Solvency

  • October 14, 2021
  • Joël Turgeon, Goldman Sloan Nash & Haber LLP

Joël Turgeon[1]

Goldman Sloan Nash & Haber LLP

Summary

Following the refinancing and repayment of first-ranking debt during a restructuring under the BIA, one of the subsidiaries in the debtor group, Down Under Pipe and Cable Locating Ltd., was solvent again, its only remaining creditor being a related party. Despite its return to solvency, Down Under still faced bankruptcy since the BIA prevents related parties from voting in favour of proposals. Down Under sought to resolve the impasse by making a motion for an order allowing it to withdraw its notice of intention and proposal. While no provision of the BIA expressly provides for such relief, the court granted the order, relying on its jurisdiction under BIA s. 107, 115.1 and 183(1).

The background

A parent company and its two subsidiaries (the “Companies”) filed notices of intention (“NOIs”) in March 2021. Their bank had issued demands and notices under section 244 of the Bankruptcy and Insolvency Act (“BIA”) in respect of the Companies’ borrowing and cross-guarantee obligations. The bank held first‑ranking, valid and enforceable security on most of the Companies’ assets.

The group’s restructuring approach focused on locating alternative financing. A new long‑term lender was found in August 2021. The Companies then repaid the bank. This streamlined the proposal process by allowing proposals to unsecured creditors only.[2]