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

3070 Ellesmere Developments

3070 Ellesmere Developments, an Ontario corporation that owns a vacant parcel of land municipally known as 3070 Ellesmere Road, Scarborough, Ontario, was placed in receivership on September 13 on application by 2478888 Ontario Inc., owed approximately $6.6 million. On August 20, the company filed an NOI and subsequently served materials seeking, among other things: the appointment of a Chief Restructuring Advisor, the appointment of a sales process advisor and the approval of a stalking horse purchase agreement. The lender opposed this motion on the basis that it was in direct contravention of its agreement with the debtor. It also took issue with the anticipated costs of the debtor-driven proceedings, arguing that a Chief Restructuring Advisor, a sales process advisor and a proposal trustee are not all required to conduct a sale process for a vacant parcel of land that a receiver alone could run at a significantly lower cost in a substantially similar timeline. RSM was appointed receiver. Counsel is TGF for the applicant and Cassels Brock for the company.

Forever XXI ULC

Forever XXI ULC, the Canadian operating subsidiary of US-based retailer Forever 21, obtained protection under the CCAA on September 29. The filing occurred on the same day the company’s parent filed for Chapter 11 bankruptcy protection in the US. In Canada, the company operates 44 retail stores in malls across the country, selling apparel, accessories and other products under the Forever 21 and other related brands. While the company’s initial expansion into the Canadian market in 2001 was promising, it has struggled to maintain profitability, and the vast majority of its stores are unprofitable. As part of its global restructuring plan, Forever 21 has determined that it will exit substantially all of its international markets, including Canada. Following a pre-filing bid solicitation process, the company selected Gordon Brothers and Merchant Retail Solutions to jointly conduct an orderly liquidation of the Canadian inventory and other assets. PwC was appointed monitor. Alvarez & Marsal is the company’s financial advisor. Counsel is Osler for the company, Goodmans for the monitor, Norton Rose Fulbright for lender J.P. Morgan Chase, Cassels Brock for Gordon Brothers, Torys for Cadillac Fairview and Gardiner Roberts for Oxford Properties.

Applefest Lodge

Applefest Lodge, a retirement residence in Brighton, Ontario, was placed in receivership on October 4 on application by Pace Savings & Credit Union, owed approximately $6.4 million. Originally opened in 1984, the residence was expanded in 2010 by opening a new wing with an additional 31 suites, resulting in a total of 67 suites. The expansion, however, created financial difficulty for the company due to construction delays, expensive financing and low occupancy and Stephen Bardo, the residence’s sole officer and director, turned to Bill Dillane, a personal friend and private investor for funds to cover the shortfall. In July 2019, Bardo passed away. He had no will, and there was no mechanism in the residence’s articles of incorporation to replace him as officer or director. With no other signing officer for the company, Dillane continued to fund expenses personally and then reimburse himself using pre-signed cheques provided by Bardo prior to his death. While an essential arrangement, it is not sustainable, and Pace therefore sought the appointment of a receiver who could borrow money while managing and preparing the residence for a sale. Grant Thornton was appointed receiver. Counsel is Harrison Pensa for the applicant and Aird & Berlis for the receiver.

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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.

Trustees’ Liability under the new Mandatory Breach Notification Rules

Richard Williams of James Williams & Associates alerts readers to new regulations that bring into question whether existing protections under the BIA and model orders are sufficient to protect trustees from liability associated with the inadvertent release of personal information.

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