Testing a debtor's right to redeem in a CCAA

Re Blue Lobster Capital Limited et al., 2025 NSSC 243
How will the court treat a late attempt to redeem by a CCAA debtor?

Summary: In this case, the court considered an eleventh hour redemption request by debtors in a CCAA proceeding, which was made at the same time as a competing sale approval motion by the monitor. The proposed sale was selected by the monitor as the successful bid following a court-approved sale process. The court rejected the companies’ redemption request and approved the monitor’s sale approval motion, emphasizing the integrity of the court-approved sale process. The court also noted that the companies, which had sought approval and themselves participated in the SISP, could not both avail themselves of protections under the CCAA, and also seek to terminate the process when they were unhappy with the result of the SISP.

Blue Lobster Capital Limited, a Nova Scotia-based real estate investment company, and 3284906 Nova Scotia Limited, 3343533 Nova Scotia Limited, and 4318682 Nova Scotia Limited (collectively, the “Companies”), which operate businesses related to the manufacturing and sale of alcoholic beverages, obtained CCAA protection on December 13, 2024 after failing to refinance their secured debt with RBC. The Companies operate a winery under the name “Lost Bell Winery” and produce and sell cider under the names “Annapolis Cider Co” and certain other alcoholic beverages under the name “Nova Scotia Spirit Co”.

There were two competing motions before the Court. The first was a motion by KSV as Monitor to approve two transactions for the Companies’ operating businesses, one for the business and assets of Spirit Co and Annapolis Cider, and one for the business and assets of Lost Bell. The recommended transactions were the culmination of a Court-approved SISP conducted in the CCAA proceedings.

The Companies brought a competing motion to terminate the CCAA proceedings on the basis of a “redemption proposal”, which they said would pay out their creditors, terminate the administrative charge and the DIP lenders’ charge, extend the stay period, approve the monitor’s activities and establish a process for fee approvals. The proposal was backed by $8.38 million in lender financing which was conditional on the CCAA termination order being made.

The Monitor argued on the basis of certain cases in the receivership context that the Companies should not be permitted to redeem at the eleventh hour. According to the Monitor, to terminate a SISP and a CCAA proceeding because shareholders are unhappy with their commercial outcome would render moot the process and harm the integrity of this and future processes. A debtor cannot both avail itself of protections under the CCAA, and also seek to terminate the process when it is unhappy with the result of the SISP.

For their part, the Companies argued that the cases referred to by the Monitor were not applicable in a CCAA proceeding, taking the position that, unlike in a receivership, the concept of "redemption" (refinance, recapitalization, or reorganization) is a fundamental component of CCAA proceedings.

The Court ultimately rejected the Companies’ motion and granted the Monitor’s sale approval motions, finding that approval of the redemption proposal at this late date—the same time as the sale approval motion—would have a chilling effect on CCAA sales processes and impact the trust that potential bidders have in the court-approved process.

The Court was not persuaded by the Companies’ argument that the receivership case law was not applicable to the CCAA proceedings, stating: “In my view, the same principles that govern in receivership cases apply to a sales process in a CCAA proceeding. In particular, I see no difference between the principles applicable where a court-approved SISP has been used in the receivership context and a right to redemption is raised just prior to the AVO and the same situation in a CCAA proceeding. The fundamental concern of the court with respect to the integrity of court-approved sale processes is common to both statutory regimes.”

The Court also noted that the Companies had submitted a bid in the SISP, and that at least one of the proposed lenders’ investors had participated in the SISP. Without further detail, the Court was left to guess whether this was simply a late-breaking bid or improved restructuring plan from prior bidders who were unhappy with the outcome of the SISP.

As a result, the Court accepted the bids chosen as the successful bids by the Monitor in the SISP, stating: “The Monitor carried out the sales process in accordance with well established principles. In the specific circumstances before me, protecting the integrity of the sales process contemplated by the sale solicitation order outweighs the Applicant Companies’ claim that they should be entitled to redeem at this late date. I am of the view that the case law and overarching principles of restructuring require the court to override the interests of the Applicant Companies to uphold the integrity of the restructuring regime and the court-approved sale process by which it was advanced.”

Judge: The Honourable Justice Darlene Jamieson

Professionals involved:

• R. Brendan Bissell and Sharon Kour of Reconstruct for KSV as monitor

• Darren O’Keefe and Essber Essber of O’Keefe & Sullivan for Blue Lobster Capital Limited et al.

• Sara Scott and Maurice Chiasson, K.C. (not appearing) of Stewart McKelvey for RBC

• Doug Schipilow and Joshua Santimaw (not appearing) of BOYNECLARKE for 4681814 Nova Scotia Limited

• Caitlin Ward for CRA

• Stephen Kingston and Olivia Feschuk of McInnes Cooper for the potential purchaser, Shannon Lynch

• Colton Smith and David Wedlake (not appearing) of Stewart McKelvey for the potential purchaser, Coast to Coast Marketing Ltd.

• Gavin MacDonald of Cox & Palmer for the proposed lenders, 4723718 Nova Scotia Limited and 4725748 Nova Scotia Limited