571 B.R. 600
Bankr. S.D.N.Y.2017Background
- U.S. Steel Canada Inc. (USSC), a Canadian subsidiary of U.S. Steel, filed for recognition under Chapter 15 to have its Canadian CCAA reorganization (filed Sept. 16, 2014) treated as a foreign main proceeding and to enforce the Canadian court's Sanction Order approving a Plan and related Transaction transferring USSC to Bedrock.
- USSC operates major Canadian facilities (Lake Erie and Hamilton), has nearly all operations, customers, management, and revenue in Canada, and reported substantial funded indebtedness (approx. CAD $2.0 billion) including a USD $193.1 million revolver.
- The Canadian Court appointed a Monitor, approved a marketing process and Plan Sponsor Agreement with Bedrock, and issued a Sanction Order approving a comprehensive Plan (transfers of shares, releases, pension/OPEB funding, land transfers, Province loans and support). The Plan’s effectiveness required U.S. recognition of the Sanction Order.
- USSC sought recognition in U.S. Bankruptcy Court as a foreign main proceeding, recognition of USSC as foreign representative, and enforcement in the U.S. of the Sanction Order and Plan; no objections were filed.
- USSC established U.S. eligibility under section 109(a) by showing property in the U.S.: an undrawn $100,000 retainer in a New York bank account and U.S.-governed contractual rights (and other U.S.-related obligations). The U.S. Court granted recognition and enforcement relief.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the CCAA proceeding is a "foreign main proceeding" under 11 U.S.C. §1517/§1502 | USSC: COMI is in Canada (incorporation, registered office, operations, revenue, management); CCAA is a court-supervised reorganization. | No objections raised in U.S. court. | Court: CCAA qualifies as a foreign main proceeding; recognition granted. |
| Whether USSC satisfies 11 U.S.C. §109(a) eligibility (domicile/place of business/property in U.S.) | USSC: has property in U.S. (undrawn $100,000 retainer in NY; U.S.-governed contracts and U.S.-law obligations; U.S.-creditor relationships). | No objections; implicit challenge would be lack of domicile/place of business in U.S. | Court: Property in U.S. requirement satisfied; Chapter 15 eligibility met. |
| Whether USSC is a valid "foreign representative" under 11 U.S.C. §101(24) | USSC: Canadian Court authorized USSC to act as foreign representative via Authorizing Order. | No objections. | Court: USSC qualifies as a foreign representative; recognition granted. |
| Whether the Canadian Sanction Order and Plan should be recognized and enforced in the U.S. under sections 1507/1521 (comity/discretionary relief) | USSC: enforcement furthers Chapter 15 purposes, is conditioned in the Plan, and creditors overwhelmingly approved the Plan; comity supports recognition. | No objections; potential concern would be adequacy of creditor protections under U.S. standards. | Court: In exercise of discretion and comity, and with no objections and adequate protections, recognized and enforced the Sanction Order and Plan. |
Key Cases Cited
- Morning Mist Holdings Ltd. v. Krys, 714 F.3d 127 (2d Cir.) (factors for determining COMI and reliance on SPhinX list)
- Drawbridge Special Opportunities Fund LP v. Barnet (In re Barnet), 737 F.3d 238 (2d Cir.) (§109(a) eligibility applied to foreign debtors)
- In re Berau Capital Resources Pte Ltd., 540 B.R. 80 (Bankr. S.D.N.Y.) (undrawn retainer and contract rights can satisfy §109(a) property requirement)
- In re Rede Energia S.A., 515 B.R. 69 (Bankr. S.D.N.Y.) (section 1521 and comity permit recognition and enforcement of foreign confirmation orders)
- In re Octaviar Admin. Pty. Ltd., 511 B.R. 361 (Bankr. S.D.N.Y.) (retainers as property under §109)
- In re Sino-Forest Corp., 501 B.R. 655 (Bankr. S.D.N.Y.) (recognition of Canadian CCAA proceedings under Chapter 15)