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"We have repeatedly noted the importance of extending comity to foreign bankruptcy proceedings. Since [t]he equitable and orderly distribution of a debtor's property requires assembling all claims against the limited assets in a single proceeding, ' American courts regularly defer to such actions."
primarily Canadian corporate enterprise group that was a goliath in the media print space recently failed to obtain recognition of its Canadian proceedings for certain U.S.based subsidiaries. The precedent could make it more difficult for corporate groups to complete an enterprise-wide reorganization or liquidation when dealing with foreign subsidiaries.
On Jan. 15,2024, Black Press Ltd. (BP Holdco) and 12 related entities (the debtors) entered into an insolvency proceeding in Canada under the Companies' Creditors Arrangement Act (CCAA). In the proceeding, the debtors sought a reversevesting order (RVO) to implement a sale process of their businesses as a combined enterprise.
The debtors pursued recognition of the CCAA proceeding as their foreign main proceedings in the U.S. Bankruptcy Court for the District of Delaware. The Pension Benefit Guaranty Corp. (PBGC) objected to recognizing the Canadian proceedings for three primarily U.S .-based debtors: Oahu Publications Inc. (BP Hawaii), Sound Publishing Inc. (BP Sound) and Sound Publishing Properties Inc. (BP Publishing Properties), each a local newspaper in either Hawaii or Washington (the U.S. newspaper debtors).
Despite recognizing the CCAA proceeding as the foreign main proceeding for the other debtors, and the Canadian sale process order, the bankruptcy court refused to recognize - as either main or nonmain - the Canadian proceeding for the U.S. newspaper debtors. This decision could negatively impact the ability of a foreign corporate enterprise to get insolvency proceedings and orders recognized for subsidiary debtors not located in the central hub of the main body of enterprise debtors.2
The Facts
The U.S. Newspaper Debtors
Renowned print and digital media businessman David Black founded the conglomerate of media entities that make up the debtors. In Canada, the group is one of the largest privately owned newspaper publishers. The group's business revolves around newspapers, magazines, digital news, marketing and commercial printing in Canada and in Washington, Alaska and Hawaii. Although each U.S. newspaper debtor was ultimately owned by a Canadian entity, they each had significant tics to the U.S.
BP Sound is incorporated in Washington...