LEXPERT MAGAZINE
|
JULY/AUGUST 2016 45
| ART OF THE CASE |
guarantee litigation, which raised
some real issues."
But Sandler says there were
many reasons for choosing the
CCAA. "Our mandate from Tar-
get Canada was for speed, certain-
ty and a graceful exit," she says. "It
was critical for us to come up with
a creative solution for the human
side of the equation relating to em-
ployees and team members."
Early on, Target signalled that
the company intended to do the
right thing — at least for its em-
ployees. As part of its CCAA fil-
ing, it set up a $70-million trust
fund to ensure that employees re-
ceived at least 16 weeks of working
notice or termination. Normally,
such claims can be compromised
by the priority rights of bondhold-
ers and others.
In other words, brand reputa-
tion mattered. "Bankruptcy was
not a possibility that we found pal-
atable," Sandler says.
Indeed, going the BIA route, in
which the guarantee and possibly
other litigation could have dragged
on for years aer the formal BIA
proceedings concluded, might only have
prolonged Target's Canadian death spiral
in the public eye. ere's little doubt that
a continuing saga featuring the $70-billion
Target enterprise against smaller Canadian
entities would have been excellent grist for
the media mill. "ere was definitely some-
thing in the optics of an out-and-out bank-
ruptcy that made Target uncomfortable,"
Galessiere says.
Jay Swartz, who with colleague Robin
Schwill of Davies Ward Phillips & Vine-
berg LLP in Toronto, led the team repre-
senting Target US, agrees that his client
would have achieved a better recovery in a
pure liquidation. "Otherwise, Target Corp.
was indifferent as between a bankruptcy
and a CCAA restructuring," he says.
To the extent that the views and interests
of Target US and Target Canada diverged,
corporate governance became an impor-
tant issue for the Osler team.
According to Sandler, "e relationship
between the parent and its subsidiary, es-
pecially the question of the intercompany
debt, overlay a dynamic that was very im-
ing third-party release, where to do so is in
the interests of creditors as a whole. During
Canada's asset-backed commercial paper
(ABCP) crisis, for example, the court grant-
ed some very broad releases. Although the
releases were widely criticized, they stood
up on appeal.
"Generally speaking, that kind of discre-
tion isn't available in bankruptcy proceed-
ings, where there would be no issue about
staying the guarantees," Bish says. "ere
are also a whole lot of rules in the BIA that
aren't in the CCAA, which avoids a lot of
disputes because we have clear law."
But Sandler contends that the strictures
of the BIA would have created a much more
drawn-out and costlier process. "If this had
been a bankruptcy, there would have been
no subordination," Sandler says. "Instead,
we'd have had a liquidation followed by
ongoing, costly litigation over the land-
lord guarantees and the 30-day goods that
would have depleted the amount of the re-
covery available from the liquidation."
Indeed, Galessiere maintains that the
desire of Target US to avoid further liti-
portant to us. Target Canada had its own
CEO, management and corporate gov-
ernance, all of which had to be acknowl-
edged in the negotiations, which invariably
involved the parent."
Still, Sandler insists that the Canadian
and American operations were for the most
part on the same page. "Nobody was afraid
to litigate," she says.
HOWEVER THAT may be, many of the
creditors' lawyers were skeptical, to say the
least, of Target Canada's motive for choos-
ing the CCAA.
"ere was no pretense that the com-
pany might survive or that there might be a
going-concern purchaser that would allow
the business to continue in some form,"
says David Bish of Torys LLP in Toronto,
who represented Cadillac Fairview Cor-
poration Limited, a large landlord. "From
the get-go, landlords were cynical, believ-
ing that Target was using the CCAA to get
around the guarantees."
Unlike the BIA, the CCAA gives judges
broad discretion to grant releases, includ-
PHOTO:
SHUTTERSTOCK
