Kevin Morley and Richard Borins recently authored an article in ABL Advisor titled “Pension Deficits in Canada – Lenders React to Indalex Decision“. The article looks at how Canadian lenders have responded to the decision of the Supreme Court of Canada in Indalex Limited (Re) (Sun Indalex Finance, LLC v. United Steelworkers, 2013 SCC 6) that was released this past February. The decision stemmed from a priority dispute between the holder of a “debtor-in-possession” (DIP) priority charge and the beneficiaries of provincial statutory deemed trusts in respect of wind-up deficits in defined benefit pension plans. Earlier, lower court decisions in the Companies’ Creditors Arrangment Act (Canada) proceedings had created uncertainty in loan markets.

Kevin and Richard provide an overview of the Supreme Court’s decision (you can also read an Osler Update on the case here). They look at practical implications of the case and some recent loan transactions that were committed or amended since the release of the Supreme Court’s decision. Since the Supreme Court determined that the scope of the provincial deemed trust included the entire wind-up deficiency of the pension plan in question, Kevin and Richard particularly address the extent to which lenders have continued to reserve against the amount of any deficiency in a borrower’s defined benefit pension plan in certain transactions.