Philip Services Completes Restructuring

The restructuring of Philip Services Corporation (Philip), a Hamilton, Ontario-based metals and environmental services company, was completed in early April, 2000. The reorganization under the CCAA in Canada and under Chapter 11 in the United States was one of the largest cross-border insolvency cases to date. Philip's main creditor group, a secured lender syndicate owed over US$1 billion, received 91 per cent of the equity of the restructured business and approximately US$335 million in secured debt. Unsecured creditors owed approximately US$150 million received unsecured debt and 5 per cent of the restructured equity. Class action litigation against Philip in Canada and the United States was settled in exchange for 1.5 per cent of the restructured equity.

In Canada, the operating assets of Philip and its Canadian subsidiaries were sold by a receiver to newly established subsidiaries of the restructured American business in conjunction with the completion of the Chapter 11 plan. Philip's Canadian unsecured creditors were given the option to participate in the Chapter 11 plan, and most elected to do so.

Philip was represented in Canada by its General Counsel, Colin Soule, and by a team at Stikeman Elliott including David Byers, Sean Dunphy, Peter Hamilton, Lewis Smith, Thomas Vowinckel, Colleen Stanley and Ashley Taylor. Philip's US counsel was Skadden, Arps, Slate, Meagher & Flom LLP including Christopher Morgan in Toronto. Blake Cassels & Graydon LLP represented the lender syndicate in Canada. The Blakes team was led by Susan Grundy and included James Dube, Sam Principi, Milly Chow, Simon Finch, Jeff Glass, Pamela Huff and Leslie Morgan. Patricia Jackson and Mario Forte of Torys acted on behalf of Ernst & Young Inc., the monitor in the CCAA case and the receiver in the Canadian asset sale transactions.

A lender group led by Foothill Capital Corporation provided a US$175 million exit financing facility to complete the restructuring. Nicholas Leblovic, Matthew Tevlin and Robin Tessier of Davies, Ward & Beck acted for the exit lenders in Canada with the assistance of David Kierans of Lafleur Brown in Montreal.

The restructuring as initially proposed was vigorously opposed by Philip's auditors and underwriters and some of its former officers and directors, who had also been sued in the class actions brought against the company. J.L. McDougall, Q.C., Norman Emblem and Brian Leonard of Fraser Milner acted for the auditors, and Benjamin Zarnett and Jessica Kimmel of Goodman Phillips & Vineberg represented the underwriters. The directors and officers were represented by Joseph Groia (now of Groia & Company) and Kenneth Kraft of Heenan Blaikie. John McDonald and John Finlay of Arvay Finlay acted for the class action plaintiffs. Other counsel involved in the case included: Andrew Kent and Hilary Clarke of McMillan Binch on behalf of Royal Bank of Canada; Edward Sellers of Osler, Hoskin & Harcourt LLP, who represented CIBC in its capacity as an unsecured creditor and as provider of banking services; Robert MacLellan and Craig Hill of Borden Ladner Gervais LLP, representing Philip's bonding companies; and Candy Schaffel of Goodman Phillips & Vineberg, who acted as Canadian counsel for the purchaser of Philip's UK metals business in a transaction that was completed at the same time as the reorganization.