IFLR 1000
The Guide to the World's Leading Financial Law Firms

Most firms in Canada reported a decline in restructuring and insolvency activity since the fall of 2010, with cases winding down as the country recovered from the 2008 financial crisis. Over the past year there has been a growing preference for M&A over restructurings, and more restructurings are taking place outside of formal court insolvency proceedings. There is consistent pressure from cost-conscious clients and stakeholders to reach a pre-arranged agreement on assets before going into formal proceedings.

There has also been a shift in restructuring and insolvency cases from Toronto to the western part of the country. One attorney expresses dismay about the lack of major filings in Toronto since CanWest and Nortel, while another laments, "Most of the interesting filings in Canada have all been out west." These have primarily been in the energy sector, and forestry, which has been affected by import/export tensions. Commonly referred to as the softwood lumber conflict, the long-standing dispute centres around the US perception that Canadians have access to cheaper timber than is available to the US market, and the Canadian view that the US imposes unfair taxes on Canadian lumber imports.

Changes to Canada's Bankruptcy and Insolvency Act and the Companies' Creditors Arrangement Act (CCAA) finally came into effect in 2010. Both saw a series of amendments which were passed in 2005 but never enacted, followed by a second set of amendments in 2007 which went through the same process. In 2009, however, the government announced that the amendments would come into force by September of that year.

A CCAA filing gives a company with more than $5 billion in liabilities permission and time (usually 30 to 90 days) to come up with a restructuring or reorganisation plan so that it can keep operating, without creditors taking any action to collect the money owed to them.

Amendments to the CCAA, which were designed to create a more balanced restructuring process, include creating a more active role by the Superintendent of Bankruptcy, codifying the court's ability to grant debtor-in-possession financings and corresponding priority charges. These changes are designed to create a more balanced restructuring process, authorising the court to grant charges over all or part of the debtor's property. The court can order that the charge takes priority over all other claims against the company, including those of secured lenders. The amendments also include rules relating to cross-border insolvencies and recognition of foreign proceedings.

The Ontario Court of Appeal issued a landmark decision in the spring of 2011 concerning Indalex, an Illinois maker of soft alloy products which filed for Chapter 11. The ruling effectively stated that beneficiaries of a pension plan with a solvency deficit can take precedence over ranking securities interests. Some lawyers are concerned that this will have a profound effect on the availability of funds, leaving potential lenders unable to provide financing for restructurings. According to one expert in the field, the ruling "will dramatically change the way restructuring is done."

The biggest challenge in the coming year though will be finding enough restructuring and insolvency work to go around. "2011/2012 may be more of a challenge because of the number of transactions completed," says one attorney.

Goodmans' 17-strong restructuring team, which includes 11 partners, maintains its dominance in the Canadian market. "Nobody can doubt their credentials," says one competitor. The firm had one of its busiest years for some time, with filings coming in from Toronto, Québec, British Columbia and Calgary. Jay Cafargini, who heads the corporate restructuring group, was named by a number of peers as a standout in the field. However, the team also had to deal with the loss of prominent partner David Bish to Torys.

In one of the Canadian broadcasting industry's largest ever restructurings, Goodmans represented the Ad Hoc Committee of the 8% Noteholders of Canwest Global Communications in connection with the C$2 billion ($2.1 billion) purchase of all of its broadcasting assets by Shaw Communications. Canwest Global was Canada's largest media conglomerate and the deal is one of the first restructurings filed under the new amendment to the Companies' Creditors Arrangement Act (CCAA).

Goodmans also represented the Ad Hoc Committee of Noteholders of AbitibiBowater and its subsidiaries in the company's restructuring of over $6 billion of liabilities and emergence from CCAA and US Chapter 11 protection. AbitibiBowater is a global leader in forest products, which owns or operates wood and paper mills and processing facilities in the US, Canada and South Korea. Unsecured creditors received common shares of the restructured AbitibiBowater in payment for allowed creditor claims listed on the Toronto and New York stock exchanges.

Led by partner Jay Swartz, Davies Ward Phillips & Vineberg's financial restructuring and insolvency attorneys have expertise in US and UK insolvency laws and work with firms in other countries on multi-national proceedings.

The firm acted for Postmedia Network in the acquisition of the publishing business of Canwest during a sale conducted under the Companies' Creditors Arrangement Act (CCAA). Assets included the largest publisher of English-language newspapers in Canada, as well as a digital media portfolio and online assets. The value of the assets was estimated to be $1.1 billion. The firm also acted in the CCAA proceedings for an Ad Hoc Committee of Noteholders, comprising 18 investment funds, which held the majority of Canwest debt and which provided a $250 million equity commitment to fund the acquisition.

Davies is also acting as Canadian Counsel for Nortel, which is in administration along with its 18 subsidiaries in Europe, the Middle East and Africa. The global restructuring is under the control of joint administrators appointed by the UK Court. The case is a multinational affair involving insolvency proceedings in the UK, Canada, the US, Israel and France.

As the first Canadian law firm to expand through an international merger, Ogilvy Renault joined the mammoth Norton Rose Group in June 2011, becoming part of a 2500-lawyer practice with 38 offices around the world. Now known as Norton Rose, the firm is Canada's 11th-largest and represents Norton Rose's first expansion into the Americas.

One banking client comments: "I am pleased to see that Ogilvy is broadening its international expertise as we see more and more of our clients expanding overseas and reducing their dependence on the US market. I believe that the merger will enhance our ability to work with Ogilvy's to assist with meeting the needs of our clients."

Derrick Tay leads the restructuring and insolvency group, which has experience in both Canada and the US. The firm has done strategic M&A as a low-cost way of procuring and stabilising the finances of target companies.

One highlight saw the team advise the directors of CanWest Global Communications, which sold $1.1 billion of its assets to Postmedia Network after filing for protection under the Companies' Creditors Arrangement Act (CCAA). In a deal that closed in October 2010, the firm also represented CanWest in the sale of its $2 billion broadcasting business to Shaw Communications.

And in one of the most complex restructurings in Canadian history, Norton Rose is currently acting as Canadian counsel to the one-time communications industry giant, Nortel Networks. Unable to meet operational costs, Nortel filed for bankruptcy protection in January 2009. Its restructuring involves Chapter 11 and Chapter 15 proceedings in the United States, proceedings under the Companies' Creditors Arrangement Act in Canada, as well as proceedings in the UK related to Nortel's 19 companies throughout the EU.

High-profile cases for Osler Hoskin & Harcourt over the past year include Canwest, Nortel and General Motors. The firm has relationships with US-based advisors, which helps it structure cross-border restructuring and insolvency transactions.

One client, who has retained the firm for over a decade, comments: "As long as we give them proper instructions, we're happy. They know their stuff and represent our interests."

In September 2010, Osler acted for Blockbuster Canada, the Canadian branch of the US-based movie rental chain Blockbuster, in connection with Blockbuster's Chapter 11 bankruptcy filing in the United States. Osler also represented the company in its subsequent stalking horse auction, held in April 2011, at which Blockbuster was acquired by the satellite company Dish Network for $233 million. The independently-operated Blockbuster Canada announced in May 2011 that it would close 146 of its approximately 400 outlets. The team was led by Tracy Sandler.

Osler also acted for Canwest Global Communications in connection with the restructuring proceedings of its print and broadcasting subsidiaries under the Companies' Creditors Arrangement Act (CCAA). After filing for protection in late 2009, Canwest sold its newspaper assets for $1.1 billion to a group of creditors led by the National Post, and its broadcasting assets for $2 billion to Shaw Communications. The deals closed in October and July 2010, respectively. Edward Sellers led Osler's insolvency team, with assistance from Tracy Sandler.

Led by Sean Dunphy and David Byers in Toronto and Jean Fontaine in Montréal, Stikeman Elliott has acted on two of the biggest insolvency cases over the past year, Canwest and AbitibiBowater.

In the first of these, the firm represented the Court-appointed monitor for the publishing and broadcasting subsidiaries of one of Canada's largest media companies, Canwest Global Communications, in their restructurings under the Companies' Creditors Arrangement Act (CCAA). The newspaper arm was subsequently sold to Postmedia Network for $1.1 billion and the broadcasting arm to Calgary's Shaw Communications for $2 billion in October and July 2010, respectively.

In the second, Stikeman acted for AbitibiBowater Group, a forest-industry giant which owns or operates 18 paper mills and 24 wood product facilities in Canada, the US and South Korea. The two-year global restructuring, under the CCAA in Canada, and Chapter 11 in the United States, included $1.4 billion in refinancing, and allowed AbitibiBowater to emerge as a viable company. It was completed in November 2010.

Led by Richard Orzy in Toronto and Kenneth Lenz in Calgary the team at Bennett Jones continues to handle wide ranging mandates usually acting on the creditors side.

The team managed to secure a role on one of last year's largest deals when they advised the noteholders committee in Nortel Networks Chapter 11 proceedings. The team led by Orzy acted on both the US and Canadian proceedings.

In a similar deal, the team also acted for the Chapter 11 committee on the proceedings surrounding AbitibiBowater, one of the largest cross border restructurings seen in Canada in the last two years.

Assisting Orzy on both the above deals was Kevin Zych, who also led in his own right when acting for Deloitte & Touche on the Chapter 11 proceedings of satellite and telecommunications firm TerreStar.

Away from Chapter 11 related work, the team also advised the first and second lien lenders consisting of almost 40 parties in the restructuring of Gateway Casinos and Entertainment.

One of the largest deals the Blakes team acted on last year was the debt restructuring of Gateway Casinos and Entertainment. The team led by Bill Kaplan and Peter Rubin acted for the company itself on the deal that required $1.1 billion of debt to be renegotiated with over 40 lenders.

In terms of creditor side mandates, the team represented Caterpillar Financial Services as the second largest creditor of Cow Harbour Construction. The proceedings saw the firm being put into receivership and subsequently sold. In a similar deal, Steven Weisz advised CIBC Asset-Based Lending as lender in the restructuring proceedings of Canwest Media, a company with both television and publishing interest. The deal was quite substantial as the combined liabilities amounted to C$5.8 billion ($5.7 billion).

The two key figures at BLG are department heads Patrick McCarthy and Michael MacNaughton and both led on most of the firm's key work last year.

One of McCarthy's biggest mandates saw him act for Ernst & Young as the court appointed monitor in the CCAA (Companies' Creditors Arrangements Act) proceedings of the Canadian subsidiaries of the SemGroup. MacNaughton was also involved in CCAA work, this time acting for tobacco manufacturer JTI-Macdonald as it sought creditor protection with debts of C$1.36 billion ($1.31 billion). MacNaughton also acted for the noteholders in the restructuring of AbitibiBowater. The case involving the pulp manufacturer was one of the largest cross border mandates of the last year.

Partner Craig Hill is also recognised in the market as one of the firm's stars and this was demonstrated last year through his work on the high profile Nortel restructuring. Hill acted for the UK Pension regulator on the CCAA and Chapter 11 proceedings of the company, one of the largest liquidating CCAA's ever completed.

Fraser Milner Casgrain suffered a double loss last year with the departures of partners Mary Buttery and Vickie Wong. The market will wait to see how the firm reacts.

CCAA (Companies' Creditors Arrangements Act) related mandates were the order of the day for the team as they were for most firms in the market. Carrying on from last year, the team provided further advise to the Official Committee of Unsecured Lenders in the high profile Nortel Case. Michael Wunder, Ryan Jacobs and Alex MacFarlane led the team on the deal that was valued at $6 billion.

Company side mandates were also on the cards including work for Medican Holding on its CCAA proceedings and Jameson House Properties, the developer of the Jameson House Project on its CCAA restructuring. The latter deal was one of the few successful real estate transactions to be completed under CCAA.

Alongside department co-head Jarney Gage, Kevin McElcheran is seen to be one of McCarthy's leading lights in restructuring and last year he acted on two notable distressed acquisition deals for the firm. In one he acted alongside Heather Meredith as Georgia Pacific acquired Grant Forest Products for $400 million. McCarthy had advised TD Bank, the agent of the first lien lenders to Grant Forest in its CCAA proceedings. In a similar deal the firm also represented Goldman Sachs as it completed the sale of the funds interest in Canwest media to Shaw. This formed part of Canwest's wider CCAA proceedings.

The team also acted in several straight CCAA proceedings, including advise to Conjuchem Biotechnologies, a leading life sciences company, in this regard.

The Nortel restructuring deal produced mandates for many firms and McCarthy was no exception. Co-head of department Gage was called in to act for the administrator of Nortel's Canadian pension plans, Morneau Shepell.

Department head Andrew Kent continues to be the key figure at McMillan and last year he acted for The Bank of Nova Scotia as administrative agent for both the senior and DIP lenders in the Canwest CCAA (Companies' Creditors Arrangements Act) proceedings. Kent also advised the lenders in the Trident Exploration CCAA.

In another notable deal Sheryl Siegel acted for Georgia Pacific on the CCAA proceedings of Grant Forest Products. The deal saw Georgia acquire the bulk of Grant's strand board business for $400 million.

Torys enters the rankings this year on the back of a strong pipeline of deals and positive recommendations from competitors. The team was described as "smaller but starting to build up" by one partner while department head Tony DeMarinis was described as a "quiet, but well thought of guy".

The team was boosted in December 2010 with the hire of David Bish from Goodmans.

One deal that highlights the firm's increased status is the Nortel Networks CCAA (Companies' Creditors Arrangements Act) proceedings. The Tory's team led by DeMarinis acted as Canadian counsel to the company on the cross border deal.

Another substantial deal saw DeMarinis again involved this time alongside Michael Rotszstain and Adam Slavens acting for Fairfax Financial Holdings as DIP lender to the AbitibiBowater restructuring. The deal, which is valued at more than $1 billion, was one of the largest deals in recent years because of the size of the pulp manufacturer.

Finally the team also acted for eyecare firm TLC Vision in its Canadian and US restructuring proceedings. The deal saw the company being sold to HIG Capital and Charlesbank Capital partners.