Recently, in Re AbitibiBowater Inc., the Province of Newfoundland sought a court order granting it access to the electronic data room of Abitibi created for the purpose of dissemination of certain non-public financial and operation information to its counsel, certain creditors, and the Monitor. The Court denied the Province’s application on the basis that it could not prove itself to be a legitimate stakeholder of Abitibi, and on several policy grounds. However, the Court was clear that there may be cases in the future where, on the basis of the particulars of each case, it would be appropriate for the Court to grant access to data rooms to stakeholders that otherwise have been denied such access by the debtor.
It is not uncommon, in a large corporate reorganization under the Companies’ Creditors Arrangement Act, for a restructuring company to establish and maintain an electronic data room wherein non-public financial and corporate information is kept and catalogued. Access, as moderated by the debtor, would normally be restricted to the debtor’s legal and financial advisors, and perhaps permitted stakeholders, to allow them to access information and better assess the ongoing state of the debtor’s business. There is no statutory requirement that a data room be established – these are the voluntary initiative of the debtor, and are created in order to facilitate the restructuring process.
In the restructuring of AbitibiBowater Inc. (and its related entities, collectively “Abitibi”), such a data room was established and, upon execution of confidentiality agreements, certain creditor and stakeholder groups (through their counsel) were granted access. The Province of Newfoundland requested access to the data room and was denied by Abitibi. The Province brought a motion seeking to compel Abitibi to allow it access.
The Court noted the breadth of the information contained in the Monitor’s Reports circulated to the general creditor group, although extensive, did not contain the same extent of financial information as contained in the data room. As such, the data room contained certain information that was not being disclosed to the creditors and stakeholders en masse.
The Court found that the Province was neither a creditor nor genuine stakeholder in the restructuring of Abitibi. However, the Province took the position that it required access in order to assess Abitibi’s ongoing status and ability to cover the Province’s claims against it. The Province alleged employment-related, tax, and environmental claims existed whereby it was either a direct or potential creditor of Abitibi. Abitibi denied the Province’s assertions that it had any actual or contingent claims. Abitibi also raised a contingent claim of its own against the Province in excess of $300 million, and alleged that the Province was seeking access to the data room for ulterior purposes, including to better assess its position in respect of this potential litigation.
The Court dismissed the Province’s motion stating that its arguments were not persuasive, whereas the concerns of Abitibi were serious and compelling. In its reasons, the Court considered the underlying principles of the CCAA, the status of the Province, and the “stakeholder” argument.
In considering the purpose of the CCAA, the Court stated it is a remedial statute designed to serve a broad constituency of stakeholders in a corporate reorganization. This includes serving the public interest, but is balanced with serving the individual interests of each player in the process. As such, consideration of broader socio-economic factors must be done within the scope of facilitating a successful restructuring to the benefit of the debtor company and its creditors.
Ultimately, the Province failed to demonstrate that it was a creditor of Abitibi, or even a potential stakeholder in the restructuring. Moreover, the Court did not agree that granting the Province’s motion would serve the greater interests of the parties or the restructuring. The Court recognized that the data room was implemented to assist and enhance the restructuring process and was not created for the purpose of open access to every creditor or potential creditor.
The Court also noted that fair and equitable treatment under the CCAA does not equate to equal and identical treatment. The Court did not see the Province as being unfairly discriminated against. It noted that the case law does not support the premise that all similarly situated stakeholders must be treated alike, and nor should stakeholders be elevated to the status of creditors in every situation where their rights may be effected.
The Court did not go so far, in this decision, as to suggest that access to data rooms should be restricted in all cases to those whom the debtor considers appropriate to have access. Instead, the Court closed with reference to the oft cited words of Farley J., and stated “justice does not dictate to grant the access sought. Nor does practicality demand that it be done here.” This leaves the question open of whether, in future cases, creditors and stakeholders could obtain access to a debtor’s non-public and confidential electronic data room, notwithstanding the restructuring debtor’s objection.