DIP Financing In A CCAA

In Stomp Pork Farm Ltd., Re, ("Stomp Park Farm") the Saskatchewan Court of Appeal partially overturned orders granted from the Saskatchewan Court of Queen's Bench which approved debtor in possession financing ("DIP Financing").

In this case, the debtor owed its first lender $20.5 million, secured against the debtor's current assets. The lender had priority over the current assets to the extent of $18 million and thereafter shared priority with the debtor's second lender.

When the debtor obtained its initial order under the Companies Creditors' Arrangement Act (Canada), (the "CCAA") the order directed the second ranking lender to provide the DIP Financing. The primary secured lender subsequently applied for an order substituting it as the DIP lender and allocating the DIP financing equally between current and fixed assets of Stomp Pork Farm. After the Court requested the monitor to analyze the situation and provide its recommendations, the Court confirmed its