August 24, 2018
SM Group, a Montreal, Quebec-based group of construction and engineering companies, obtained protection under the CCAA on August 24. Founded in 1972, the company has grown to employ over 1,100 workers and operates in over 35 countries. In recent years, however, it has suffered significant losses, due largely to several unprofitable contracts. In July 2017, the company engaged Deloitte as a financial advisor. On several occasions, Deloitte recommended that the company should, in light of its financial situation and liquidity issues, enter into an operational and financial restructuring. These recommendations were ignored by the company, which was more focused on the long-term perspective of total revenues vs. the profitability of contracts and its short-term critical issues. On August 22, 2018, Deloitte was made aware that the company was filing a motion to initiate proceedings under the CCAA, Despite its role with the company, Deloitte was never consulted with respect to the proposed CCAA restructuring plan. PwC was proposed to be the monitor. The company's main secured lenders, Alaris Royalty (“Alaris”) and Integrated Private Debt Fund V (“IPDF”), respectively owed $93.7MM and $25.8MM, were also not consulted. Alaris and IPDF (the "Applicants") immediately filed a joint application seeking the establishment of an alternative restructuring plan under the CCAA, arguing that the company's filing was in direct violation of the company's contractual obligations and was not made in good faith. The Applicants further allege that the company's proposed restructuring does not benefit the company's most important stakeholders but appears solely to serve the interests of the company's largest shareholder and former president, Bernard Poulin, who, according to the company, was removed from management following allegations of corruption. The court granted the Applicants their requested initial order and Deloitte was appointed monitor. LGBM was appointed Chief Restructuring Officer for the company. Counsel is McCarthy Tétrault for Alaris, Miller Thomson for IPDF, Blakes for the company and Stikeman Elliott for Deloitte. Integrated Asset Management is providing interim financing during the proceedings.