Slate Grocery REIT T.SGR

RE:RE:RE:Sixth report to the trustee- final, dated May 12, 2015

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1. Credit Bids

Credit bids are new to Canada, but have been used in the US for some years. Essentially, a prefiling secured lender proposes a plan whereby the lender takes back assets for the financing. The bid can then be topped by another lender, hence generating increased value for the debtor company and thus ultimately for creditors. Essentially, the creditor’s bid become the stalking horse bid; it is the reserve bid whereby the lender will take back the asset for that amount.

Such a strategy was recently used in the Canwest case, although there is not a reported judgment on the court’s approval of this strategy. In the Canwest case, the credit bid was topped by a junior lender working in conjunction with other parties, generating increased value. Unlike new parties to insolvency proceedings, pre-filing secured creditors are already privy to confidential information and generally such lenders are entitled to see other bids and proposals. The challenge is how to create a transparent and fair process that is truly open enough to generate other bids where appropriate.

https://www.law.utoronto.ca/documents/conferences2/IACCL10-Sarra.pdf

https://www.lexisnexis.com/ca/guidance/insolvencyandrestructuring/synopsis/95898:101846/Sale-Procedures-(See-also-Asset-Purchase-Agreements)/Credit-Bidding

What is a Credit Bid?

This practice note looks at the use of a credit bid to acquire the assets of a debtor in the context of a sales process under the Companies’ Creditors Arrangement Act. It explains what a credit bid is, the theory behind credit bidding, the value of a credit bid, and the circumstances in which it may be appropriate to offer and accept a credit bid — Joseph Bellissimo and Eleonore Morris, Cassels Brock & Blackwell LLP.