Philip Services

Philip Services Corp. , a Hamilton company which processes and brokers ferrous scrap and copper and provides industrial services, is now attempting to recycle itself. On June 25, 1999, Philip filed a voluntary application to reorganize under the CCAA in Canada and on June 28, 1999 voluntary petitions under Chapter 11 of the U. S. Bankruptcy Code. This has become North America’s second largest concurrent cross-border filing. Philip became the victim of rogue copper futures trading which contributed to losses that forced Philip to restate its financial results for the years 1995 to 1997. This gave rise to a host of shareholder class action suits which have plagued the company ever since. An additional element causing much interest in the press has been the increased presence of investor Carl Icahn who has come to own 14% of the common shares of Philip and heads a group which owns about 20% of Philip’s U. S. $1. 1 bn. bank debt. Under the recently filed plan, the syndicate bank lenders are agreeing to forgive more than $700 million in debt in exchange for more than 90% of the common shares. Philip has also reached an agreement in principle with the Canadian and U. S. class action plaintiffs to settle all class action claims in return for 1. 5% of the common shares of the restructured company. This agreement is subject to final documentation and approval by the Courts. Agent for the syndicate, account intermediary and the single largest affected unsecured creditor in the plan is the Canadian Imperial Bank of Commerce (the “CIBC”). The CIBC, together with Bankers Trust, are also the DIP lenders providing DIP financing of U. S. $100 million. Providing legal counsel to CIBC in Canada is a team led by Edward A. Sellers of the Toronto office of Osler, Hoskin & Harcourt. U. S. counsel to the CIBC is being provided by a team from the New York office of Sidley & Austin being led by Ronald Trost.

Mr. M. Colin Soule, Executive Vice President & General Counsel & Corporate Secretary of Philip is organizing the restructuring from within the company. Mr. Soule is being assisted by David Byers and Sean F. Dunphy of the Toronto office of Stikeman Elliott and a team of U. S. counsel from Skadden, Arps, Slate, Meagher & Flom. Acting as counsel for The Syndicated Lender Group is the New York office of White & Case. Canadian counsel to the Syndicate is being led by Susan Grundy of the Toronto office of Blake, Cassels & Graydon. Canadian counsel to the Official Creditor’s Committee in the U.S. Chapter 11 proceedings is Bruce Leonard of Cassels, Brock & Blackwell. A confirmation date in the US proceedings has been set for October 13, 1999.