Sandra Abitan (left) and Marc Wasserman (center) are partners, and Dave
Rosenblat is an associate in the Insolvency & Restructuring group of Osler,
Hoskin & Harcourt LLP. Abitan is located in the firm’s Montreal office and
advises public and private corporations, equity sponsors and strategic
purchasers, financial institutions, and monitors, as well as Canadian
and U.S. asset-based lenders and liquidators. Wasserman practices
corporate and commercial law in the areas of corporate restructuring,
financial services, and private equity in the firm’s Toronto office.
Rosenblat is also located in Osler, Hoskin & Harcourt’s Toronto office.
main proceeding. Without written
reasons for the court’s decision,
uncertainty remains as to what courts
will do when factual circumstances
deviate from those in Catalyst.
For example, will the nerve center of
a U.S. subsidiary shift from a foreign
jurisdiction as certain management
responsibilities are delegated? If so,
what threshold must be passed before
such a shift occurs? In other words,
how much decision making must
occur beyond the U.S. border before a
company’s nerve center will be found
to reside in a foreign jurisdiction?
It will also be interesting to see how
U.S. creditors react to the Catalyst
decision. Objecting to a recognition
proceeding may be used to gain a
strategic advantage in commercial
negotiations by creating uncertainty
and forcing a debtor to potentially have
more than one plenary proceeding.
Although the objecting noteholders
opposed the motion on legal principles,
one can speculate as to whether they
actually wanted to deal with the U.S.
Catalyst entities under a Chapter 11
proceeding or whether the position
they took was really an attempt to gain
leverage in the commercial negotiations.
It is important to note that the Catalyst
entities had previously pursued a
consensual restructuring under
the Canada Business Corporations
Act and were in negotiations with
their major stakeholders for some
time prior to the commencement
of the Chapter 15 proceedings. The
uncertainty surrounding recognition
of a foreign main proceeding may
open the door for unhappy creditors
to try to use the objection process
strategically to influence the outcome
of commercial negotiations. J
1 See In re Fraser Papers, Inc., Case No. 09-
12123 (Bankr. D. Del. July 13, 2009) and In
re Angiotech Pharm., Case No. 11-10269
(KG) (Bankr. D. Del. Feb. 22, 2011).
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