Coverage of the latest Canadian insolvency filings, court cases, news and more

Invictus MD Strategies (TSX-V: GENE)

Invictus MD Strategies (TSX-V: GENE), a Vancouver, British Columbia-based cannabis company, along with certain other related companies, obtained protection under the CCAA on February 13. Several factors contributed to the company’s liquidity issues. First, it was unsuccessful in obtaining additional financing to complete a custom-built cultivation facility. Second, the strains of cannabis that are currently being harvested by Acreage – the company’s primary operating entity – are not in demand as they do not have sufficient potency. While Acreage is currently in the process of changing over its plants to those with a higher level of potency, these plants will not be ready to harvest until mid-April 2020. Finally, the company’s revenues have decreased due, in part, to lower consumer demand and market saturation. The company currently owes approximately $10.6 million to ATB Financial and $5.3 million to Authentic Brands, a New York-based brand management company. PwC was appointed monitor. Counsel is Cassels for the company, BLG for the monitor and Blakes for ATB.

Tri-Ag Implements

Tri-Ag Implements, a Wainwright, Alberta-based agriculture equipment supplier, filed an NOI on February 10, listing $15.4 million in liabilities, including $4.7 million to CNH Industrial Capital Canada, $3.7 million to Farm Credit Canada, $2.8 million to De Lage Landen and $2.7 million to Encompass Credit Union. A few days prior to the NOI filing, on February 6, an interim receivership order was granted over the assets subject to FCC’s security. FCC provides the company with floor plan financing and became worried when it was discovered that at least five pieces of machinery had recently been sold without the sale proceeds being remitted to FCC. The Bowra Group is the proposal trustee. EY is the interim receiver. Counsel is Reynolds Mirth Richards & Farmer for the company and Sharek Logan & van Leenen for FCC.

1034179 B.C. Ltd.

1034179 B.C. Ltd., a British Columbia-based developer of a 66-unit rental property in Maple Ridge, British Columbia, obtained protection under the CCAA on February 4, listing approximately $22.0 million in liabilities, including $6.3 million to Canadian Western Bank. In April 2017, the company purchased the Maple Ridge property and began development with $3.8 million of purchase financing from its subordinate lenders. It was contemplated that construction would finish at the end of June 2018. By the fall of 2017, however, the company realized that construction was taking longer and costing more than initially anticipated. In the beginning of 2018, the company managed to secure an additional loan from its subordinate lenders as well as from CWB in order to complete construction of the property. Shortly after these financings, it became clear that the company could not complete construction or meet the monthly interest payments under its loan agreement with the subordinate lenders. In September 2019, CWB ceased to advance funds to the company and demanded payment for $6.3 million. The company proposed to CWB that it would seek relief under the CCAA so that interim financing could be obtained to complete construction of the development for the benefit of all stakeholders. The Bowra Group was appointed monitor. Fasken is counsel to the company.

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Michael Rotsztain on the evolution of restructuring and insolvency work in Canada

“Study the past if you would define the future.” Confucius’ quote is a favourite of Michael Rotsztain, who has been practising insolvency and restructuring law for over 40 years. Beginning his career at the legendary insolvency firm of Harries Houser, where he had the good fortune of being mentored by a bankruptcy law dream team, Michael spent the major part of his career at a leading Bay Street firm and since 2014 has been the chair of GSNH’s five-lawyer Restructuring and Insolvency Group. Michael recounts how insolvencies and restructurings have evolved over his career and shares what he thinks are the next steps in the evolution.

SCC Ruling Affirms Authority to Approve Litigation Funding Agreement as Interim Financing

Sylvain Rigaud, Arad Mojtahedi and Saam Pousht-Mashhad of Norton Rose Fulbright share the news that the Supreme Court of Canada has unanimously allowed the appeal in the Bluberi v. Callidus case, which cements the use of litigation funding in the insolvency context and confirms that the CCAA judge has the discretion to determine whether a litigation funding agreement should be put to a creditors’ vote.

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