Coverage of the latest Canadian insolvency filings, court cases, news and more
Cirque du Soleil
Cirque du Soleil, a Montreal, Quebec-based international live entertainment media company, obtained protection under the CCAA on June 30, listing approximately $1.6 billion (USD) in liabilities. Founded in 1984, the company is known for its circus performances, which it performs in custom-built, partner-hosted resident venues and through touring in different cities around the world. Over the past few years, the company has been responsible for the majority of the top 10 live shows in Las Vegas, accounting for almost half of the total Las Vegas box office sales. The company has seen its business operations severely impacted by the global COVID-19 pandemic, which has left the company with no other option but to call for an unprecedented halt in activity until the pandemic is controlled. Following the closure of all its shows worldwide, the company’s revenue income entirely vanished and the company had no choice but to make significant temporary employee reductions to its nearly 5,000-person staff, impacting 95% of its workforce. Even before the pandemic struck, however, the company was already heavily indebted to its creditors following a series of major acquisitions. While the company hopes to be able to restart its operations as soon as possible, it is currently unable to generate any revenues, thereby preventing it from meeting its obligations as they become due. After carefully considering its options, the company made the difficult decision to terminate the employment of a majority of its employees, including the already laid-off employees. A group of existing investors, with backing from Investissement Québec, the Quebec government’s investment wing, has tabled a bid to take over the company, inject $300.0 million (USD), and provide financial support for 3,500 laid-off employees. EY was appointed monitor. Counsel is Stikeman Elliott for the company, Fasken for the monitor, Norton Rose Fulbright for Investissement Québec, McMillan for RBC, the administrative agent for the first lien lenders, and Goodmans for an ad hoc group of first and second lien lenders.
Hillspring Farms Ltd. (“Hillspring”), HSF Foods Ltd. (“HSF”), and Hillspring Warehouse & Logistics Inc.
Hillspring Farms Ltd. (“Hillspring”), HSF Foods Ltd. (“HSF”), and Hillspring Warehouse & Logistics Inc., New Brunswick-based companies engaged in grain brokerage services, a potato farming operation and a flake plant operation, filed for bankruptcy on June 26 and was placed in receivership on June 29 on application by Farm Credit Canada (“FCC”), owed approximately $70.7 million. In addition to the financing with FCC, the companies obtained financing from CIBC, owed approximately $21.2 million, BDC, and other secured creditors. Although the combined HSF and Hillspring revenues between 2016 and 2019 remained relatively stable, averaging $30.6 million per year, the combined debt levels increased from $43.1 million in 2016 to $107.0 million in 2019. After various meetings, the companies determined that a sale of their assets was the only solution to address their financial difficulties and the court has approved a sale agreement between the companies and McCain Produce. EY is the bankruptcy trustee and was appointed receiver. Counsel is McInnes Cooper for the companies, Cox & Palmer for FCC and Davies for the McCain Produce.
GNC Holdings (NYSE:GNC)
GNC Holdings (NYSE:GNC), a Pittsburgh, Pennsylvania-based specialty retailer of health and wellness products, in its capacity as foreign representative, had its Chapter 11 proceedings recognized in Canada under the CCAA on June 29. Over the past two years, the company has entered into several transactions that it believes have contributed to an increased profitability and stability of its business. However, faced with the potential maturity of its secured debt obligations and a decline in sales and liquidity caused by the COVID-19 pandemic, the company had no option other than to commence Chapter 11 bankruptcy. Following weeks of extensive negotiations, the company was able to negotiate DIP financing and a pre-arranged standalone plan of reorganization with certain of their secured lenders. The company hopes that the overwhelming support of the company’s creditors will enable it to quickly emerge from its insolvency proceeding. The company will continue operating, but will become a smaller company as it plans to close up to 20% of its 5,800 retail stores, including 29 stores in Canada. FTI was appointed information officer. Counsel is Torys for the company, Stikeman Elliott for the information officer, and Cassels for the DIP lenders.
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OEL Projects Ltd (Re), 2020 ABQB 365
Will the Court approve the sale of an insolvent business to a related party without a sales process?
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.
Authority to Bar a Creditor From Voting & Litigation Funding as Interim Financing : The Supreme Court of Canada’s Ruling in Bluberi
Sylvain Rigaud, Arad Mojtahedi and Saam Pousht-Mashhad of Norton Rose Fulbright analyze the recently released written reasons in the Bluberi case, noting that the unanimous decision of the Supreme Court, penned by Chief Justice Wagner and Justice Moldaver, reverses the decision of the Québec Court of Appeal, reinstates the supervising judge’s order, and enshrines the recognition of an insolvency court’s wide discretion to, inter alia, approve a litigating funding agreement as interim financing, and to prevent a creditor from voting on a plan where it is found that said creditor is acting for an improper purpose.