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Credit Bidding in Canada - Recent Developments


Lawyer Joe Latham, Brendan O'Neill
Area Corporate Restructuring


Article originally published in Lexpert Magazine’s 2011 Guide to the Leading US/Canada Cross-Border Corporate Lawyers in Canada.

Credit bidding is firmly established in the US and on the rise in Canada.  Several factors have contributed to its development.  First, it has become increasingly common for CCAA proceedings (and Chapter 11 proceedings) to involve (indeed to basically conclude by way of) a sale of all or substantially all of the debtor’s assets.  Second, these large-scale asset sales are increasingly being conducted by way of a competitive CCAA auction process at which one or more bids compete for the assets.  Third, these CCAA auctions are increasingly being attended by sophisticated loan-to-own investors (acting individually or as a syndicate of lenders) who generally seek to acquire a distressed company and/or its assets by way of either (a) exchanging their debt into equity of the reorganized company in a plan scenario or (b) credit bidding that debt in the event that the restructuring proceeds by way of a sale process. As each of these factors becomes increasingly common and commonplace in Canada, so too does credit bidding.

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