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Jay Swartz looks back at the Cadillac Fairview restructuring and more

Jay Swartz
Davies Ward Phillips & Vineberg LLP

His recent receipt of the 2017 OBA Murray Klein Award of Excellence in Insolvency Law speaks volumes about the respect and admiration peers and clients have for Jay Swartz. Jay sits down with us and recounts some of the highlights of his career thus far.

1) How did you get into the restructuring industry?

I articled at Davies Ward & Beck (now Davies Ward Phillips & Vineberg LLP) in 1973 and have been a partner at the firm since 1976.

When I started practising, I did a broad range of general corporate work including private M&A, corporate governance, reorganizations and general commercial law. I also was responsible for competition and foreign investment law issues. In the late 70s, we started to develop a banking practice, primarily representing foreign banks or banks who had complex structured loans and syndication issues. This practice morphed into a structured finance practice and I was able to work on the first derivative deals in Canada, the first securitization transactions, the first Canadian toll road financing, structures to strip preferred shares and corporate bonds and a variety of other unique financial products.

Given our relationship with Citibank, we were retained to assist Citibank, as the agent of a large syndicate which had a loan relating to Dome Petroleum; this was part of one of the first big restructurings in Canada. Because we had no restructuring expertise, we worked with Shearman & Sterling, as U.S. counsel, and John Honsberger, Arthur Jacques and Jay Carfagnini as Canadian counsel to represent our client. This led to the development of a restructuring practice which was ancillary to our transactional practice at the firm. At the time, the law in Canada relating to restructuring (as opposed to bankruptcy and receivership) was just starting to develop and we were fortunate enough to get in near the ground floor. We approached restructuring as a deals practice.

2) What file or court case in your career are you most proud of and why?

One of the many novel experiences during my career was working on the development of the securitization industry in Canada. We worked with an investment banker, an accountant, rating agencies and tax lawyers to develop a product which was unique to the Canadian environment. It took over a year to address issues surrounding tax, accounting and reporting, “legal for life” and creditworthiness. As the concept gained acceptance in the market, the product had to be adapted for a variety of asset classes including the first, and perhaps only, triple A rated securitization of mutual fund commissions in the world. This was a team effort that started a multi-billion dollar industry. I was able to work with many talented professionals. This market ultimately moved from being financed with term debt to being financed with asset-backed commercial paper and, unfortunately, led to the largest restructuring in Canadian history.

Among the many interesting insolvency cases was the restructuring of Cadillac Fairview Corporation. This was primarily a balance sheet restructuring and was one of the first where distressed investors holding senior and junior bonds dominated the process. Initially, this was a debtor sponsored filing. From start to finish, we were able to complete a very complex restructuring of one of Canada’s largest real estate companies in about four months. Many interesting issues were presented before the Court including issues relating to the voting of different classes of bonds where there were substantial cross-holdings. Justice Farley ordered the creditors’ meetings to be held at 11:00 p.m. on a Friday night. Going into the meeting the outcome was very uncertain but ultimately the plan was approved. Cadillac Fairview emerged as a very strong public company which was ultimately acquired by Ontario Teachers’ Pension Plan. Our clients, the bondholders, fared very well.

3) How has your career evolved over the years?

I have been very fortunate in being able to practise in a variety of areas and face numerous new challenges on an ongoing basis. My practice has evolved from being more technically focused to being more strategic. I have been able to learn about a wide range of industries covering the entire spectrum of the Canadian economy; the business aspect of transactions is more interesting to me than the pure legal issues. Although, I had no intention of setting foot in a court room when I was called to the bar, the insolvency practice has led me into the commercial courts of many provinces and has added insight into how the law really works.

I have been supported by very talented and well-motivated lawyers and a team-oriented environment which has allowed for the development of innovative ideas and legal processes. The practice continues to be interesting because we are always encountering new issues and problems in a changing legal environment. It is a constant learning process. I continue to be very busy but, because of technology, I am not tethered to my desk as I was in the early years of my practice.

4) Do you see any legal process or areas of insolvency law that need updating or clarification?

Insolvency law is constantly evolving and adapting to the changing legal and economic environment. The courts have been taking steps to make their processes more efficient but much still needs to be done in the area to avoid the wasted time inherent in sitting around waiting for motions and appointments. As a general matter, I strongly favour the principle-based approach to insolvency law which exists in Canada rather than a rules-based framework. It allows for more innovation and creativity and solutions tailored to business reality. I also believe that experienced counsel find this area highly predictable notwithstanding the fact that the rules are not necessarily all written down. As the judges have become more experienced, the law evolves in a positive manner. Parliament would be unable to keep up with the evolution of this area of law, particularly because it is not a high-priority issue.

5) What is one thing that most people you work with would not know about you?

Most of my colleagues know that I like to golf and they also know that I’m not very good at it. They may not know about my eclectic reading and TV habits, ranging from fiction and satire to history and politics, and general interest in “real” news.