Canadian insolvency proceedings of Pacific Exploration & Production Corporation recognised as main proceedings by Colombia and US Bankruptcy Court
Wednesday, 28th September 2016
Pacific Exploration & Production Corporation ("the Company"), a Canadian public company who explore and produce natural gas and crude oil with operations focused in Latin America. In April 2016, the Company obtained an initial order from the Ontario Superior Court for protection under the Companies' Creditors Arrangement Act for the restructuring of the Company.
Following the initiation of the Canadian restructuring proceedings, the Company, through its 'foreign representative', PricewaterhouseCoopers Inc, sought recognition of the proceedings in the US and Colombia.
The Company filed a Chapter 15 petition in the US Bankruptcy Court for the Southern District of New York to recognise the Canadian proceedings as foreign main proceedings pursuant to sections 1517 and 1520 of the Bankruptcy Code, enforcing the initial order of the Canadian court, for PwC to be recognised as foreign representative as well as other orders to grant a stay of execution against the Company's assets in the US.
The Bankruptcy Court recognised PwC as foreign representative and found that the Canadian proceedings are 'foreign main proceedings', as Canada is the Company's Centre of Main Interests. As such the proceedings are entitled to recognition by the Bankruptcy Court, and granted all relief afforded to foreign main proceedings. The Bankruptcy Court enforced an automatic stay over all of the Company's property and assets within the US and ordered that no proceedings could be brought in the US that would in any way relate to, or interfere with, the Canadian proceedings.
Two days later, the Colombian Superintendencia de Sociedades (the "Superintendence") granted an order under Colombian Law 1116 of 2006, strongly influenced by the Model Law, recognising and giving effect to the Canadian proceedings as foreign main proceedings. This followed much debate over the Company's COMI. To determine the Company's COMI, the Superintendence took into account the administration location where decisions are made, the location of employees and creditors, the domicile of major contracts, the domicile of the reorganisation of the debtor and where financing is organised or decided. After considering these matters, the Superintendence found that the Company's COMI is in Canada.
The Superintendence's main role is the protection of local creditors and as such demanded guarantees for the payment of national debt from the Company. The Superintendence also authorised the granting of security over the assets of Colombian subsidiaries of the Company in connection with the Company's proposed US $500m debtor-in-possession financing and $134m letter of credit facility.
These decisions allow the Canadian restructuring to proceed with the cooperation of the US Bankruptcy Court and the Colombian Superintendence.