Independent CRO takes control of Baffinland sale process

Re Nunavut Iron Ore, 2026 ONSC 5800
Who should have ultimate decision-making authority under a court-ordered sale and investment solicitation process?

Summary: The Ontario Superior Court of Justice has approved a creditor-backed sale and investment solicitation process (SISP) for Baffinland Iron Mines, stripping the company’s shareholder-controlled Operating Committee of final decision-making authority over the process and placing it in the hands of independent chief restructuring officer William Aziz of BlueTree Advisors. Justice Jana Steele rejected the debtors’ competing proposal, which would have preserved the Operating Committee’s control over key decisions, including waiving bidding requirements, selecting a successful bidder and finalizing a transaction. The Court accepted concerns raised by Export Development Canada, the DIP lender under a US$400 million facility, and other secured creditors that the Operating Committee, whose members are appointed by shareholders Energy & Minerals Group and ArcelorMittal, faced potential conflicts of interest that could undermine confidence in the sale process. Justice Steele found that the Committee’s newly adopted independence protocol did not adequately address those concerns and rejected the argument that transferring SISP authority to the CRO amounted to improperly removing management under section 11.5 of the CCAA. Emphasizing the Court’s broad supervisory jurisdiction under section 11, Justice Steele held that the CRO-led process would better ensure fairness, transparency and independence, while allowing the Operating Committee to continue overseeing the mine’s day-to-day operations.

Baffinland Iron Mines Corporation (“BIM Corp”), 12334992 Canada Inc. and Baffinland Iron Mines LP (“BIM LP”) (collectively, the “Debtors”) are a group of affiliated entities that are engaged in the iron ore mining business at the Mary River mine (the “Mine”) on Baffin Island, Canada. The Debtors were granted an initial order on May 15, 2026 (the “Initial Order”) under the Companies’ Creditors Arrangement Act (the “CCAA”). Among other things, the Initial Order appointed FTI Consulting Canada Inc. as monitor (the “Monitor”). On July 29, 2026, the Court approved the engagement of a chief restructuring officer (CRO). On August 27, 2026, the Court approved the engagement of Morgan Stanley (the “Transaction Advisor”) as the financial advisor.

The Debtors moved for an order approving their proposed sale and investment solicitation process (the “Debtors’ Proposed SISP”), and directing the CRO, the Debtors, the Transaction Advisor and the Monitor to perform their respective obligations under the SISP. The Secured Lenders proposed an alternative SISP where the CRO had the ultimate decision-making authority under the SISP (the “Secured Lenders’ Proposed SISP”). In the alternative, the Secured Lenders argued that they would be satisfied with the Monitor having ultimate decision-making authority under the SISP.

The ultimate decision-maker in the SISP would have the authority to make critical decisions, including waiving bidding criteria, selecting the successful bid, and finalizing any resulting transaction. The issue was who should run the SISP and exercise ultimate decision-making authority over the process.

All parties agreed that a sale was warranted and that a SISP was necessary. A SISP would benefit the whole economic community as it would allow the CRO and Transaction Advisor to solicit bids for a broad range of transaction alternatives. The two proposed SISPs were substantially the same, except that they diverged on who would have the final say on key decisions. Under section 11 of the CCAA, the court has the authority to approve a sale process in relation to the business and assets of a debtor prior to or in the absence of a plan of compromise or arrangement. Courts must consider the following factors in determining whether to approve a SISP in the absence of a plan:

1. Is a sale or transaction warranted at this time?

2. Will the sale benefit the whole “economic community”?

3. Do any of the debtors’ creditors have a bona fide reason to object to a sale of the business?

4. Is there a better viable alternative?

The criteria set out in section 36 of the CCAA for approval of a sale may also be considered indirectly when the court is considering whether to approve a sale process. When considering approval of a SISP, the court may assess whether the proposed SISP is likely to satisfy the following requirements:

1. The process is reasonable and fair;

2. The best price has been obtained;

3. The Monitor supports the SISP; and

4. The creditors and other interested parties were consulted..

The Debtors’ Proposed SISP was not acceptable to the DIP Lender. The DIP Lender argued that SISP decisions should be made by the CRO, an independent court officer, with the assistance of the Monitor. The DIP Lender was concerned that “a SISP in which the Operating Committee composed of shareholder representatives retains decision making authority invites unresolvable conflicts and process concerns.” The DIP Lender relied on its negotiated rights under the DIP Agreement.

The Court found that the support of the Monitor, the CRO and the other secured creditors demonstrated that the DIP Lender was exercising its discretion reasonably under section 27 of the DIP Agreement. On that basis alone, the Debtors’ Proposed SISP ought to be rejected. The contracting parties agreed on a set of terms in the DIP Agreement, including that the SISP terms must be acceptable to the DIP Lender in its reasonable discretion.

The Court found that allowing the CRO to run the SISP was the most transparent, fair and even-handed approach, emphasizing its obligation to ensure that the process was not only fair but also seen to be fair. The Secured Lenders had concerns over governance and potential conflicts of interest involving the Operating Committee that called into question whether the Operating Committee could act independently in making key decisions in the SISP. By contrast, the CRO was a neutral, court-appointed person, whose compensation would not be impacted by the decisions he makes under the SISP.

The selection of the Secured Lenders’ Proposed SISP did not remove the Operating Committee or strip the Operating Committee of all its powers. The Operating Committee was continuing with its business of running the Mine. Under the Secured Lenders’ Proposed SISP, the Operating Committee will continue to operate the company, while the CRO would oversee the court-supervised sale process. The Secured Lenders’ Proposed SISP would place the CRO in the driver’s seat; however, there would still be an obligation for the CRO to consult with the Debtors’ stakeholders.

The Court approved the Secured Lenders’ Proposed SISP.

Judge: Justice Jana Steele

Professionals involved:

• Natasha MacParland of Dentons for Bill Aziz, the Chief Restructuring Officer of Baffinland

• Derek Ricci, Natalie Renner and Dylan Young of Davies for the Debtors

• Marc Wasserman, Jeremy Dacks and Michael De Lellis of Osler for FTI as Monitor

• Alan Merskey and Natalie Levine of Cassels for the Ad Hoc Committee of Senior Secured Noteholders

• Maria Konyukhova and Philip Yang of Stikeman Elliott for Oaktree Capital Management, L.P. and Hartree Partners, LP

• Orestes Pasparakis, Evan Cobb and Andrew McComb of Norton Rose Fulbright for Export Development Canada

• Ken Rosenberg of Paliare Roland for the International Union of Operating Engineers Local 793

• Kaleigh Sonshine and Patrick Corney of Miller Thomson for Qikiqtaaluk Corporation & Qikiqtani Industry Limited

• Mark Polley and Brookelyn Kirkham of Polley Faith for Qikiqtani Inuit Association and Nunavut Tunngavik Inc.

• Matthew Gottlieb and John Carlo Mastangelo of Lax O’Sullivan for the Energy & Minerals Group LP

• Preet Gill of Bennett Jones for ArcelorMittal

• John Salmas of Dentons for Willington Trust National Association

• Kevin Wu of Blakes for Centaurus Capital LP