COVID-19 Financial Services Update: Pre-Packaged Sale Transactions

As Canadian businesses continue to grapple with decreased cash flow as a result of COVID-19, many are looking for ways to generate cash and remain viable. One such way is to sell non-core assets or divisions through a pre-packaged sale transaction.

Pre-Packaged Sale Overview

Often when a debtor wants to liquidate assets it files under the Companies' Creditors Arrangement Act¹ (the "CCAA"). Such a sale of the debtor's assets can become subject to a lengthy and expensive court process whereby the debtor's assets are marketed for sale and potential purchasers are identified and invited to submit bids. Once a winning bidder is selected, an asset purchase agreement is negotiated and settled and the sale is then approved by the court and a vesting order is issued in favour of the purchaser. Alternatively, a pre-packaged sale allows the debtor to generate cash and sell non-core assets to a purchaser outside of a formal court process with the mutual understanding that the