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Jul 11, 2017

Commercial bankruptcy on hold as company renegotiates debt

When a business is suffering from financial challenges, there are a few steps they can take to possibly avoid bankruptcy. Drug manufacturer Concordia International Corporation took one of these steps by filing for court protection from creditors in Ontario last week. This court protection allows the company to restructure its debt through negotiations as it decides whether to take steps towards commercial bankruptcy.

There are few options Concordia has to renegotiate its debt. These include a debt exchange, where creditors trade obligations for new debt or equity. The company is still considering filing for commercial bankruptcy through Chapter 11 in the United States and the Companies' Creditors Arrangement Act in Canada. They have four weeks to reach an arrangement with creditors.

The pharmaceutical company currently has $3.7 billion in debt. An Ontario court granted creditor protection until further notice, which prevents creditors from pushing debt into default. In order to restructure the debt, a majority of holders with representation from each stakeholder class will need to approve of the plan. An Ontario judge will also need to sign off on the plan.
Restructuring like this allows companies like Concordia to pursue resolutions outside of commercial bankruptcy. This method can sometimes be easier as it allows for less court intervention and can be done more quickly in some cases. However, if the restructuring takes too long, creditor protection can be lifted and commercial bankruptcy may be necessary. Those with questions about dealing with creditors and legal issues during a bankruptcy or commercial restructuring should contact an Ontario lawyer.

Source: Financial Post, "Debt-laden Concordia said to seek restructuring plan in bid to avoid bankruptcy", Allison McNeely, Oct. 24, 2017