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The pensioners are, however, mainly the victims of inaction in Ottawa, home of the political masters of Canada’s bankruptcy and insolvency regime. The plight of the Indalex pensioners, of which there are about 200, might not be so dire today if Parliament had acted a decade ago to protect pension assets as a “super priority” when companies begin to fail. Instead, parliamentarians lined up behind bankers and others. A 2003 Senate banking committee report rejected the idea of giving pensioners preferences because it felt super-priority status could “reduce the monies available for distribution to creditors.”
Well, yes, that would be the effect, wouldn’t it. But why are “creditors” entitled to priority status over pensioners? The legal and financial professionals who work the lucrative insolvency field in Canada have a list of reasons to put banks and other lenders ahead of employees and pensioners, none of which deserve the reverence and support they’ve received from Ottawa.
The Indalex case pitted Sun Indalex Finance against the United Steelworkers, and against a small group of Indalex executives who also had pensions with the company.
In some narrow sense, the court’s decision makes sense. When Intalex was moving through the Companies’ Creditors Arrangement Act (CCAA), a court decided to allow Indalex to take on emergency debt from “debtor-in-possession” lenders. That emergency debt, following federal CCAA rules, was designed to allow Indalex to keep operating in the hope of returning to profitability.
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