December 6, 2018
2423402 Ontario Inc., a special purpose entity wholly owned by Bondfield Construction, was placed in receivership on December 6 on application by BMO, as administrative agent for a syndicate of lenders owed approximately $122.2MM. The company has no significant assets other than the contracts for the development, construction and completion of the Cambridge Memorial Hospital, a $187.0MM, fixed price project. The debtor does not perform the construction itself but rather contracts the work back to Bondfield. The project is currently two years behind schedule and is effectively stalled. In August 2018, the hospital delivered a default notice that triggered a 120 day period, expiring December 11, after which the project could be terminated. BMO has been attempting to work consensually with Zurich Insurance, the project's surety, to restart the project but has been advised by Zurich that BMO cannot make a demand on the performance bond unless it first "steps-in" to the project, a step which may create additional liability for the lenders. Alvarez & Marsal was appointed receiver and will immediately make a demand under the performance bond. The receivership is also intended to stay the ability of the hospital to terminate the project. Counsel is McCarthy for the applicant, Miller Thomson for the hospital, Cassels Brock for Infrastructure Ontario, Osler for the debtor and Bondfield and GSNH for Zurich Insurance. EllisDon is prepared to serve as the replacement contractor to complete the project.