TravelBrands Inc. authorized to borrow up to $4m from Red Label as it restructures

TravelBrands Inc. authorized to borrow up to $4m from Red Label as it restructures

TORONTO — Legal analysis of the provisions contained in the CCAA court order support the “business as usual” claim for TravelBrands as it restructures its operations.

Effective May 27, 2015, the Ontario Superior Court of Justice ordered and declared that the Companies’ Creditors Arrangement Act of Canada applies to TravelBrands Inc. and that subject to further court order, the company shall have the authority to file with the court a plan of compromise or arrangement.

The order appears to be identical to the draft order filed by the company and its proposed monitor KPMG Inc. in the company’s application, indicating that the Court accepted all the submissions made by the company and KPMG in KPMG’s pre-filing report and the affidavit of Francesco DeMarinis filed with the court in support of the company’s application for the court order.

The court order provides for a stay of proceedings against the company and further provides as to how the company is to operate including its relationships with its business partners while it is subject to this order.

Of particular importance to Canadian travel agents is paragraph 6(a) of the court order which authorizes the company “all outstanding or future commissions, loyalty points, override payments, marketing funds, and amounts owing to travel agents in connection with the Company’s sale of travel products”.

Paragraph 6(d) authorizes the company to pay “with the consent of the Monitor and Red Label Vacations Inc. amounts owing for goods and services actually supplied to the Company prior to the date of the court order.”

Paragraph 6(e) allows the company with the consent of KPMG and Red Label to pay any other costs and expenses that are deemed necessary for the preservation of the property and or business of the company.

The court order includes various other provisions aimed an enabling the company to continue operating its business and maintaining its existing relationships. These provisions include the following:

  • Authorizing the company to pay outstanding and future wages and other compensation to its employees;
  • Authorizing the company to stay in possession and control of its current and future assets and properties;
  • Entitling the company to continue to utilize its central cash management system; and
  • Entitling the company to pay all expenses and capital expenditures reasonably necessary for the preservation of its property or business and payment for goods and services actually supplied to the company following the date of the court order.

The court also authorized and approved some specific arrangements including authorizing the company to borrow up to $4,000,000 from Red Label Vacations Inc.

Paragraph 18 of the order provides that until June 26, 2015, the company’s payment processors are restrained from terminating or altering the supply of goods or services as may be required by the company under the merchant agreement between Red Label and the processing partners.

Complete copies of the documents referred to above and other relevant documents are available at KPMG’s website kpmg.com/Ca/en/services/Advisory/TransactionRestructuring/CreditorlinkSites/Travelbrands/pages/default.aspx.