In Re Farmpure Seeds Inc. (2008 CarswellSask. 639) the
Saskatchewan Court of Queen's Bench considered the proposal of
a debtor which was conditional upon the Court approving DIP
financing and a super priority charge.
The debtor company had an active business, however became
insolvent as a result of rapid expansion and some improvident
contracts. The debtor could not meet its immediate obligations such
as payroll, and the need to pay its suppliers upon receipt of their
seed product. As a result, the debtor could not maintain its
business without immediate interim financing.
In allowing the DIP financing, the Court considered the pending
amendments to the BIA, including section 50.6, which is not yet in
force. That provision outlines the factors a Court must consider
when granting interim financing:
the period during which the debtor is expected to be subject to
how the debtor's business and financial affairs will be
managed during the proceedings;
whether the debtor's management has the confidence of its
whether the loan would enhance the prospects of a viable
proposal being made;
the nature and value of the debtor's property;
whether any creditor would be materially prejudiced; and
the report of the Trustee.
The Court observed that this provision mirrors the proposed
amendment to the CCAA, and the Court therefore also analysed some
of the recent jurisprudence under the CCAA, which held that it is
now well established that the Court may confer upon a DIP lender
the benefit of a super priority charge on the assets of the
insolvent corporation, in priority to pre-existing secured
Additionally, the Saskatchewan Court considered and followed the
reasoning of Madam Justice Romaine in the Re Bearcat Exploration
Ltd. (2004), 3 CBR (5th) 167 (Q.B.) which held there is nothing in
the BIA which precludes the bankruptcy Court in proposal
proceedings from authorizing DIP financing and awarding a super
In the circumstances of the case, the Court found that the
prospective statutory requirements set out above were fulfilled,
and therefore allowed the DIP financing and super priority
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