Lender and trucking company face off

Re JBT Transport Inc. et al.
What factors will a court consider in determining whether to put a trucking company into receivership or CCAA protection?

Summary: In this case, the court considered competing applications for a CCAA initial order made by a trucking company and a receivership order sought by its senior secured lender. In the year leading up to the applications, the company had worked cooperatively with its lender by, among other things, engaging a financial advisor mandated by the lender, selling real estate, implementing an operational restructuring and ultimately paying down a significant portion of the debt (from $25 million owing to $16.2 million), all while staying current on all monthly payments. Ultimately, however, following a year of forbearance, the company was unable to refinance the loan or come up with a restructuring plan acceptable to the lender. The company brought a CCAA application and the lender brought a competing receivership application. The court ultimately granted a first instance "very skinny" initial order under the CCAA without prejudice to all issues raised or to be raised at the de novo comeback hearing. To grant the Receivership application could have deprived the company of a debtor-led going concern restructuring alternative. The converse was not true. To grant the CCAA application did not foreclose a liquidation or even the appointment of a receiver at or after the comeback hearing.

JBT Group have over 58 trucks, 162 dry vans and refrigerated units, and over 100,000 square feet of state-of-the-art, GDP Gold-certified food storage and warehouse spaces. They also employ 83 full-time employees and 23 independent owner-operators. On January 24, 2025, after the JBT Group’s senior secured lender, The Toronto-Dominion Bank, served demands for the entirety of the approximately $16.2 million debt owed to it, the JBT Group (also, the “Applicants”) each filed a Notice of Intention to Make a Proposal under the Bankruptcy and Insolvency Act, and Dodick Landau Inc. was appointed as proposal trustee under each NOI proceeding.

In the year prior to the issuance of the demands, the Applicants and TD Bank had worked cooperatively during various periods of forbearance by TD Bank. In particular, the Applicants engaged a financial advisor mandated by TD Bank, effected the sale of a real property and other assets, and implemented an operational restructuring to decrease operating costs and enhance the Applicants' market position. The Applicants’ efforts resulted in a reduction of the indebtedness owed to TD Bank from approximately $25 million in January of 2024 to $16.2 million in December of 2024, while they stayed current on all monthly payments. Nevertheless, over the course of over a year of informal and formal forbearance agreements with TD Bank, the Applicants were unable to come up with a refinancing proposal or restructuring plan that was acceptable to TD Bank.

Consequently, the Applicants sought protection under the Companies' Creditors Arrangement Act. In response to the CCAA application, TD Bank served its own draft Notice of Application seeking to lift the NOI stay of proceedings and an order appointing BDO Canada Limited as receiver of the Applicants pursuant to s. 243(1) of the BIA and section 101 of the Courts of Justice Act. TD Bank had the right under its security documents to appoint a receiver. The Applicants also consented to the appointment of a receiver under the terms of the Forbearance Agreement.

The Applicants maintained that a debtor-in-possession (DIP) restructuring that permitted the JBT Group (that is familiar with their own operations, suppliers, customers, employees and other stakeholders) to continue the Applicants' operations in the normal course would better preserve value for stakeholders through a going concern option, as opposed to a receivership that the Applicants believed would put their going concern business at risk. TD Bank was not prepared to continue financing the going concern business of the JBT Group in a CCAA where the indebtedness owed to it would increase (as the Applicants were not proposing to service its loans) and be primed and eroded in favour of other proposed DIP financing, administration charges for the professional fees of the Applicants and Dodick Landau, and possibly certain non-trust priority payments for pre-filing debt to “critical suppliers”.

The Court granted an Initial Order under the CCAA, without prejudice to all issues raised or to be raised at the de novo comeback hearing. TD Bank was transparent that it did not know whether the Receiver would recommend any options that preserve the going concern operations of the Applicants' business. To grant the Receivership application could have deprived the Applicants of a debtor-led going concern restructuring alternative. The converse was not true. To grant the CCAA application did not foreclose a liquidation or even the appointment of a Receiver at or after the comeback hearing when the Receivership application would also come back on for a hearing with the CCAA application hearing de novo.

Given the short service of the CCAA application (and corresponding shorter service of the Receivership application), the lack of any response at all from the critical suppliers who were the subject of certain relief sought by the Applicants (or any other creditor of the Applicants), and the insufficient time for a complete record to be developed on the question whether TD Bank would suffer material prejudice if it were not permitted to pursue its Receivership application, the Court concluded that a first instance "very skinny" order ought to be made in the CCAA application. The Court also encouraged the parties to consider the appointment of Dodick Landau as Receiver if the Receivership application were to be later granted in order to benefit from Dodick Landau's familiarity with the Applicants' business and assets and liabilities.

The Applicants maintained that they needed a critical suppliers charge and corresponding direction for the continued supply of goods and services by the critical suppliers, with discretion to pay pre-filing obligations to these creditors to ensure their continued supply, even during the initial stay period. The Court found that there was precedent for granting this type of order and was satisfied that it was appropriate to do so in the circumstances of this case, at least for the initial stay period and until February 28, 2025, the day after the comeback hearing, at which time the critical suppliers will have the opportunity to be heard.

The Court granted a longer “10-day” comeback period and granted a “very skinny” form of the Initial Order to deal only with the essential relief needed during the period up until the return of the comeback hearing.

Judge: Justice Kimmel

Professionals involved:

• Brendan Bissell and Caitlin Fell of Reconstruct for the Applicants

• Craig Mills and Matthew Cressatti of Miller Thomson for TD Bank

• Graham Phoenix and Shahrzad Hamraz of Loopstra Nixon for Dodick Landau as Monitor

• Nabiel Dawood of Miller Thomson for Trade-Mark Industrial Inc. et al.