Coverage of the latest Canadian insolvency filings, court cases, news and more
Silicon Valley Bank (Canada) (“SVB”)
Silicon Valley Bank (Canada) (“SVB”), a US bank which operates as an authorized foreign bank under the Bank Act in Canada, was ordered to be wound up on March 15, on application by the Attorney General of Canada (“AG”), at the request of the Superintendent of Financial Institutions, pursuant to s. 621 of the Bank Act. Since the Minister of Finance authorized SVB to establish a branch in Canada in 2019, it has been focused on lending to early and mid-stage start-up businesses, as well as venture capital and global private equity firms, in the technology and life sciences sectors. On March 8, 2023, SVB announced significant losses. The following day, investors and depositors reacted by initiating withdrawals which caused SVB to be incapable of paying its obligations as they became due. On March 10, 2023, the California Department of Finance Protection and Innovation appointed the Federal Deposit Insurance Corporation (“FDIC”) as receiver of SVB. On March 13, 2023, FDIC announced that it had transferred all SVB deposits and substantially all of SVB’s assets to a newly-created FDIC operated bring bank (the “Bridge Bank”) to protect the depositors of SVB. In Canada, on March 10, 2023, the Office of the Superintendent of Financial Institutions advised SVB and the Canadian branch that it was taking control measures to ensure that sufficient assets were maintained in Canada. On March 11, 2023, the Superintendent appointed PwC as its representative to assist in the supervision of the Canadian branch. The AG is of the belief that, in light of the circumstances facing SVB in the US, including the fact that it is in receivership and that substantially all of its deposits and assets have been transferred to Bridge Bank, which is not authorized to carry on business in Canada, any measures short of a Winding-up Order and appointment of a liquidator would be inadequate to deal effectively with the risk posed to Canadian creditors. PwC was appointed as Liquidator. McCarthy Tétrault is counsel for Silicon Valley Bridge Bank N.A. and Osler is counsel for the Liquidator.
By Dina Milivojevic
LoyaltyOne, Co. (dba AIR MILES®)
LoyaltyOne, Co. (dba AIR MILES®), a Toronto, Ontario-headquartered company which operates the AIR MILES® Reward Program with its non-applicant subsidiary Travel Services Co., obtained CCAA protection on March 10. In conjunction with the CCAA filing, the company’s US parent, Loyalty Ventures, Inc. (“LVI”) and certain affiliated entities have filed voluntary petitions for relief under Chapter 11 of the US Bankruptcy Code. The company operates in a competitive environment and is burdened by significant funded debt imposed on it by its former US parent company, Bread Financial Holdings, Inc. (“Bread”). In 2021, instead of investing in the business to adapt to emerging market trends, Bread undertook a spinoff transaction that moved its loyalty programs businesses, including AIR MILES®, to a newly-created public parent company, LVI. To effect the transaction, Bread required LVI to borrow, and the company and others to guarantee, US$675 million pursuant to a credit agreement with Bank of America N.A. as administrative agent on behalf of a group of lenders, and to transfer the proceeds to Bread. Bread also extracted US$100 million of cash from the balance sheets of the company and other LVI subsidiaries. In January 2023, LVI informed the company that it lacked sufficient funds to make payments under the credit agreement, and the company paid those amounts pursuant to its guarantee. LVI’s cash constraints created significant risks for the company, as it required significant support from LVI, including IT, legal, tax, HR, accounting and treasury services. Accordingly, on February 28, 2023, the company made an $18 million intercompany loan to LVI to permit it to pay fees, costs and expenses associated with developing a global transaction with the companies’ stakeholders. Extensive discussions have resulted in BMO agreeing to provide DIP financing and acting as stalking horse purchaser in the proposed SISP in the CCAA. Counsel/professional advisors are:
Cassels is counsel for the company in the CCAA, while A&M and PJT Partners are restructuring and financial advisors to the company, respectively;
KSV is the Monitor, represented by Goodmans;
Akin Gump is counsel for LVI in the Chapter 11 proceedings;
Torys and Sullivan & Cromwell are counsel for BMO as DIP lender and stalking horse purchaser,
Bennett Jones and Gibson Dunn are counsel for an Ad Hoc Group of Term B Lenders, while Piper Sandler is their financial advisor; and
BLG and Haynes and Boone are counsel for an Ad Hoc Group of Term A Lenders and Bank of America as administrative agent, while FTI Consulting is their financial advisor.
By Dina Milivojevic
CanWest Aerospace Inc. and Can West Global Airparts Inc. (collectively, “CWA”)
CanWest Aerospace Inc. and Can West Global Airparts Inc. (collectively, “CWA”), British Columbia-based businesses that provide specialized aircraft, helicopter and avionic services locally and internationally, obtained CCAA protection on March 8. Prior to the COVID-19 pandemic, CWA’s business was very profitable. Unfortunately, due largely to travel restrictions and supply chain delays arising from the pandemic, CWA has been unable to generate sufficient funds and is in default of its loan with RBC, its primary secured lender. RBC issued a demand letter and notice of intention to enforce security dated January 17, 2023, and subsequently filed a receivership application. RBC also opposed the CCAA application, which was ultimately successful. FTI was appointed Monitor. Clark Wilson is counsel for CWA, Dentons is counsel for RBC and Kornfeld is counsel for BDC.
By Dina Milivojevic
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