Atchison Casting Corp. is a US-based public company based in Kansas with a portfolio of North American Steel casting businesses. Facing low wage overseas competition, it filed for Chapter 11 protection under the US Bankruptcy Code to attempt a restructuring. Part of the Atchison Casting company portfolio included four companies based in Ontario and Quebec. Total debt was approximately $100 million.
After exploring various restructuring options with the aid of its Chicago-based investment banker, Atchison Casting decided to market its North American businesses for sale as a going concern. In order to harmonize the Chapter 11 sale process with Canadian legal requirements, the Quebec business filed a notice of intention to make a proposal under the Bankruptcy and Insolvency Act. In addition, Ernst & Young was appointed by the Superior Court of Justice as a monitoring receiver over the operating businesses and a liquidating receiver over the non-operating ones. No buyer was found for the Quebec business, which closed, but management remained in place in the Ontario operating business subject to the supervision of the interim receiver.
Once a buyer had been selected in the US, Harris Bank applied, with the support of Atchison Casting and Canadian management, to expand the powers of the interim receiver to include the power to sell the Canadian business to the winner of the US Chapter 11 auction process, subject to there being a minimum attained price for the Canadian assets. Although there was no mutually approved cross-border protocol, a mechanism was developed by the court to harmonize the cross-border interim sales and processes.
The sale closed on December 22, 2003, and a court order was obtained for the distribution of the sales proceeds in Canada, which barred claims against the sales proceeds as of January 27, 2004, while the US sales proceeds are being distributed by the conversion on January 22, 2004, of the US Chapter 11 case to a Chapter 7 liquidating bankruptcy.
The debtor companies, Atchison Casting, CastCan Inc., Canadian Steel Foundries Ltd., Kitchener Steel Casting Ltd. and London Precision Machine & Tool Inc., were represented in Canada by Cassels Brock & Blackwell LLP, with a team that included Christopher Besant, James Rossiter, Lydia Salvi, Marco Filice and Joseph Bellissimo. Canadian Steel Foundries was also represented in Quebec by Robert Tessier of Pouliot Mercure in Montreal.
The purchaser, KPS Special Situations Fund II, LP, through various affiliates, was represented by Goodmans LLP, with a team that included David Bish, Joseph Pasquariello, Thomas Macdonald, Glenn Ernst, Alan Bowman, Samantha Traub and Jana Steele in Ontario and Charles Reagh of Stewart McKelvey Stirling Scales in Nova Scotia. Harris Trust and Savings Bank, and E&Y, as interim receiver of the Canadian companies, were represented by Fraser Milner Casgrain LLP, with a team that included Shayne Kukulowicz, Michael Wunder and John Russo in Toronto and Louis Dumont in Montreal.