December 21, 2018

Filing Type:

Company Counsel: Osler

Trustee: PwC

Applicant: TD

Applicant Counsel: McCarthy

Industry:

Province:

2423403 Ontario, a special purpose wholly owned by Bondfield Construction, was placed in receivership on December 21 on application by TD, as administrative agent for a syndicate of lenders, owed approximately $61.5MM. The company has no significant assets other than relevant contracts relating to the development, construction and completion of the Hawkesbury & District General Hospital Redevelopment Project. Due to various defaults committed by Bondfield, the contractor, there have been delays and cost overruns in the construction of this project, which involves expanding the emergency department, constructing a new family birthing centre, and renovating the existing hospital to accommodate a new psychiatry in-patient unit. Notwithstanding the various default events by Bondfield, the company has not taken any steps to declare Bondfield in default, to seek performance by Bondfield, or to make demand under the performance bond. In September 10, 2018, the hospital delivered a default notice that triggered a 120-day period, expiring January 9, 2019, after which the project could be terminated. TD has made demand on the performance bond; however, Zurich Insurance, the project's surety, asserted that since TD had not asserted "step in" rights, the demand on the performance bond is considered a "nullity." The lenders have the option of asserting "step-in" rights but disagree they are obligated to exercise these rights, which may expose the lenders to greater liability. This appears to be a gating issue with Zurich Insurance. The purpose of the receivership is narrow and targeted, specifically formulated to address the issues that have arisen in this case in a discrete manner. PwC was appointed receiver. Counsel is McCarthy for the applicant, BLG for the hospital, Osler for the company and Bondfield and GSNH for Zurich Insurance.