Embed Size (px)
Citation preview
1
Court File No. CV-15-10980-00CL
ONTARIO SUPERIOR COURT OF JUSTICE
COMMERCIAL LIST
IN THE MATTER OF THE COMPANIES’ CREDITORS ARRANGEMENT ACT, R.S.C. 1985, c. C-36, AS AMENDED
AND IN THE MATTER OF A PLAN OF COMPROMISE OR ARRANGEMENT OF
TRAVELBRANDS INC.
SECOND REPORT OF THE MONITOR KPMG INC.
DATED AUGUST 13, 2015
2
TABLE OF CONTENTS
INTRODUCTION ....................................................................................................................................... 4
PURPOSE .................................................................................................................................................... 5
TERMS OF REFERENCE ........................................................................................................................ 5
UPDATE REGARDING CERTAIN KEY STAKEHOLDERS ............................................................. 7
REVIEW OF 2224855 ONTARIO INC.’S SECURITY ........................................................................ 11
UPDATE ON PROPOSED SALE PROCESS ........................................................................................ 13
CASH FLOW RESULTS RELATIVE TO FORECAST ...................................................................... 14
UPDATED CASH FLOW FORECAST ................................................................................................. 15
REQUEST FOR EXTENSION OF STAY PERIOD ............................................................................. 17
MONITOR’S RECOMMENDATION ................................................................................................... 18
3
INDEX TO APPENDICES
Appendix A – First Report of the Monitor dated June 23, 2015 Appendix B – Letter from Landlord’s counsel to Monitor’s counsel dated June 29, 2015 Appendix C – Letter from Monitor’s counsel to Landlord’s counsel dated July 3, 2015 Appendix D – Actual receipts and disbursements for the eight-week period ended August 7, 2015 Appendix E – Cash flow forecast for the 13-week period from August 8 to November 6, 2015
4
INTRODUCTION
1. On May 27, 2015, TravelBrands Inc. (“TravelBrands” or the “Company”) filed an
application with the Ontario Superior Court of Justice (Commercial List) (the “Court”) pursuant
to the Companies’ Creditors Arrangement Act, R.S.C. 1985, c. C-36, as amended (the “CCAA”).
2. On the same date, this Court granted an initial order (the “Initial Order”) which provides
for, among other things, the appointment of KPMG Inc. as Monitor of the Company (“KPMG” or
the “Monitor”) in the CCAA proceedings (the “CCAA Proceedings”) and a stay of proceedings
until June 26, 2015, or such later date as this Court may order (the “Stay Period”). In connection
with the Company’s application for protection under the CCAA, KPMG in its capacity as the
proposed monitor, provided the Court with a pre-filing report (the “Pre-Filing Report”) dated
May 27, 2015.
3. On June 15, 2015, the Court issued an order, inter alia, permitting the Landlord (as defined
below) to market the premises located at 75 Eglinton Avenue East, Toronto, and to collect rent
directly from subtenants.
4. On June 23, 2015, the Monitor filed its first report to the Court (the “First Report”) which
provided an update in connection with the Company’s restructuring and proposed sale process. A
copy of the First Report is attached hereto as Appendix “A”.
5. On June 24, 2015, the Court issued three orders: (a) an Amended and Restated Initial Order
(the “Amended and Restated Initial Order”), which amended the provision dealing with the
priority of the Court-ordered charges to confirm that such charges do not apply to customer trust
funds; (b) an order vesting all right, title and interest in the Applicant’s property located in the
building at 75 Eglinton Avenue East, Toronto, in the Landlord; and (c) an order (i) extending the
Stay Period until August 17, 2015, and (ii) providing certain protections to the Bank of Montreal
(“BMO”) relating to the settlement of wire transfers, automatic clearing house transactions and
electronic funds transfers, as well as providing that no bankruptcy or receivership application shall
be made by certain parties without two days advance notice to BMO (the “Stay Extension
Order”).
5
6. The Monitor’s reports, all orders issued by the Court, all documents filed with the Court
and all notices relating to these CCAA Proceedings are available on the Monitor’s website at:
www.kpmg.com/ca/travelbrands.
PURPOSE
7. The purpose of this second report of the Monitor (the “Second Report”) is to provide the
Court with information on the following:
a. An update regarding certain of the Company’s key stakeholders;
b. The review of the security of the direct parent of TravelBrands, 2224855 Ontario Inc.
(“Holdco”), conducted by the Monitor and its counsel;
c. An update on the Company’s proposed sales process;
d. The Company’s actual receipts and disbursements for the eight-week period ended August
7, 2015, as compared to the cash flow forecast previously filed with the First Report (the
“June Cash Flow Forecast”);
e. TravelBrands’ updated cash flow forecast for the period from August 8 to November 6,
2015 (the “August Cash Flow Forecast”);
f. The Company’s request for an extension of the Stay Period until September 30, 2015; and
g. The Monitor’s recommendation.
TERMS OF REFERENCE
8. In preparing this Second Report and making the comments herein, the Monitor has been
provided with, and has relied upon, unaudited financial information, books and records and
financial information prepared by the Company, discussions with management of the Company
(“Senior Management”) and information from other third-party sources (collectively, the
“Information”). Except as otherwise described in this Second Report in respect of TravelBrands’
cash flow forecast:
6
a. The Monitor has reviewed the Information for reasonableness, internal consistency and use
in the context in which it was provided. However, the Monitor has not audited or otherwise
attempted to verify the accuracy or completeness of the Information in a manner that would
wholly or partially comply with Generally Accepted Assurance Standards pursuant to the
Chartered Professional Accountants Canada Handbook and, accordingly, the Monitor
expresses no opinion or other form of assurance in respect of the Information; and
b. Some of the information referred to in this Second Report consists of forecasts and
projections. An examination or review of the financial forecasts and projections, as
outlined in the Chartered Professional Accountants Canada Handbook, has not been
performed.
9. Future oriented financial information referred to in this Second Report was prepared based
on Senior Management’s estimates and assumptions. Readers are cautioned that since projections
are based upon assumptions about future events and conditions that are not ascertainable, the actual
results will vary from the projections. Even if the assumptions materialize, the variations could be
significant.
10. The information contained in this report is not intended to be relied upon by any
prospective purchaser or investor in any transaction with TravelBrands.
11. Additional information regarding the matters discussed herein is set forth in the affidavit
of Francesco DeMarinis sworn August 10, 2015 (the “DeMarinis Affidavit”).
12. Capitalized terms not defined in this Second Report are defined in the Pre-Filing Report,
the First Report, the Amended and Restated Initial Order and the DeMarinis Affidavit.
13. Unless otherwise stated all monetary amounts contained in this report are expressed in
Canadian dollars, which is the Company’s common reporting currency.
7
UPDATE REGARDING CERTAIN KEY STAKEHOLDERS
Suppliers and Travel Agents
14. To date, TravelBrands’ suppliers and travel agents have continued to support the Company
during the CCAA Proceedings. The Company, with the assistance of the Monitor, continues to be
in discussions with its critical suppliers and key agents, as required in order to ensure that there is
no disruption in the supply of travel services and no impact on TravelBrands’ customers.
15. As provided for in the Amended and Restated Initial Order, TravelBrands continues to pay
its suppliers for amounts owing for travel goods and services supplied during the CCAA
Proceedings. The Company has continued to pay travel agents in the ordinary course for services
supplied to the Company prior to and since the date of the Initial Order.
International Air Transport Association
16. As noted in the DeMarinis Affidavit, the Company, the Monitor and their respective
counsel have had ongoing discussions with the International Air Transport Association (“IATA”)
and its counsel regarding TravelBrands’ compliance with certain financial criteria (the “IATA
Financial Covenants”) which are required to be met in order for the Company to participate in
IATA’s “billing and settlement plan” (“BSP”). The BSP is described in the Monitor’s First Report.
17. Further to the correspondence received from counsel to IATA on June 16, 2015 in which
IATA took the position that the Company is currently not compliant with the IATA Financial
Covenants, TravelBrands provided IATA with financial statements as at April 30, 2015, from its
external accountants showing that it was in compliance with the IATA Financial Covenants. The
Monitor is informed that, although the Company’s financial statements as of April 30, 2015 reflect
that TravelBrands is compliant with the IATA Financial Covenants, IATA maintains that
compliance is based on full-year financial statements as at the Company’s year-end, being October
31. IATA will only confirm compliance based on year-end results. Therefore, IATA has asked
that the existing $5.1 million letter of credit posted in favour of IATA remain in place.
18. IATA is continuing to work with TravelBrands to resolve the matter and the Monitor is
informed that, IATA has assured TravelBrands that it will not revoke the Company’s participation
rights in the BSP at this time. In the interim, the Company has extended the expiration date on the
8
existing letter of credit from August 1, 2015 to September 30, 2015. TravelBrands and IATA are
scheduled to meet in person in late August to discuss TravelBrands’ compliance with the IATA
Financial Covenants and the need for and the quantum of the letter of credit.
Travel Industry Council of Ontario
19. TravelBrands and the Monitor have been providing the Travel Industry of Ontario
(“TICO”) with regular weekly financial and other reporting since the commencement of the
CCAA Proceedings as part of the monitoring regime implemented by TICO.
20. In addition, at TICO’s request, the Company, in consultation with the Monitor, sought and
obtained the amendments to the Initial Order reflected in the Amended and Restated Initial Order
described in paragraph 5 above.
Bank of Montreal
21. As described in the First Report, TravelBrands and its counsel and the Monitor have been
in discussions with BMO and its counsel since the commencement of the CCAA Proceedings. On
July 9, 2015, the Company agreed to and executed certain amendments to its credit facilities with
BMO: (a) revolving credit facility for the issuance of letters of credit (the “LC Facility”); (b)
corporate MasterCard facility; and (c) treasury facility (the “Treasury Facility”).
22. The amendments to the BMO lending agreements require, inter alia, that: (a) the LC
Facility is capped at $9.1 million; (b) amendments to the terms and conditions of existing letters
of credit be approved by BMO; (c) any new letters of credit be 100% cash collateralized by the
Company; (d) 100% of the replacement risk value, as calculated by BMO, on any new currency
hedging agreements entered into under the Treasury Facility be cash collateralized by the
Company; (e) the Company maintain a minimum working capital ratio of 1.0:1.0, tested annually,
based on the audited financial statements of TravelBrands; and (f) the Company provide certain
reporting on a weekly, bi-monthly and monthly basis throughout the CCAA Proceedings.
23. In addition, at BMO’s request, the Company, in consultation with the Monitor, sought and
obtained the relief in the Stay Extension Order described in paragraph 5 above.
9
24. The Monitor is of the view that the amendments to the BMO lending agreements are
commercially reasonable and will allow the Company to continue to operate the business in the
normal course without interruption.
25. TravelBrands and the Monitor have been providing BMO with regular weekly financial
and other reporting since the commencement of the CCAA Proceedings pursuant to the now
executed amendments to the BMO lending agreements.
Sears
26. In its First Report, the Monitor noted that TravelBrands was engaged in constructive
negotiations with Sears Canada Inc. (“Sears”) regarding potential go-forward business
arrangements which would enable the Company to continue operating the Sears Travel business
and mitigate the negative financial impact of the existing license agreement with Sears. The
negotiations between Sears and the Company led to an agreement (the “Amending Agreement”)
on July 6, 2015, whereby the terms of the license agreement between Sears and the Company
would be amended.
27. Pursuant to the Amending Agreement: (a) the Company is no longer required to make
minimum annual commission payments to Sears; (b) the Company and Sears will share earnings
generated by Sears Travel; (c) the Company and Sears granted each other conditional releases from
liabilities arising prior to the date of the Amending Agreement; and (d) a special purpose bank
account has been established, which Sears will administer as trustee for the benefit of Sears and
the Company.
28. The Monitor is of the view that the Amending Agreement is commercially reasonable and
mitigates the negative financial impact of TravelBrands’ existing license agreement with Sears and
allows the Company to continue to operate the Sears Travel business going forward.
29. TravelBrands has and continues to operate the Sears Travel business in the normal course
during the CCAA Proceedings and the Company and Sears are in the process of implementing the
Amending Agreement.
10
75 Eglinton Leased Property
30. As described in the DeMarinis Affidavit, subsequent to the effective date (June 28, 2015)
of the disclaimer notice delivered by the Company, with the consent of the Monitor, to the 75
Eglinton landlord (the “Landlord”), counsel to the Landlord sent letters to both the Company’s
and the Monitor’s counsel on June 29, 2015. The letters from the Landlord’s counsel referred to,
among other things, the Landlord’s intention to bring a motion for an order (the “Red Label Claim
Order”) granting an opportunity for creditors to challenge the validity of the secured claim (the
“Intercompany Claim”) of Holdco against the Company.
31. In the letter dated June 29, 2015 addressed to the Monitor’s counsel, Stikeman Elliott LLP
(“Stikeman”), the Landlord requested that the Monitor confirm: (a) whether it had been provided
with an independent security review in connection with the Intercompany Claim by its counsel;
(b) whether it had independently verified evidence of advances comprising the Intercompany
Claim; and (c) whether the investigations and verifications set out in the Red Label Claim Order
had been completed. A copy of the letter from counsel to the Landlord is attached hereto as
Appendix “B”.
32. In response, the Monitor’s counsel sent a letter to the Landlord’s counsel on July 3, 2015.
The letter from counsel to the Monitor, a copy of which is attached hereto as Appendix “C”,
confirmed that:
a. Stikeman has completed a security review of the security granted by TravelBrands to
secure the amounts owing to Holdco and has rendered opinions to the Monitor with respect
to the validity thereof. The conclusions reached in those opinions are set forth in detail in
paragraph 35 below;
b. The Monitor was provided with and has reviewed a number of documents, as described in
the letter, evidencing the advances comprising the Intercompany Claim, and that based on
its review of the above-noted documents, the Monitor saw no need for further investigation;
and
11
c. The Monitor was preparing a report to be filed with the Court describing the Monitor’s
review of the grant of security by TravelBrands to Holdco. The Monitor’s review of
Holdco’s security interest is set forth in paragraph 38 below.
33. Since the issuance of the above-noted letters, the Monitor understands that TravelBrands,
the Landlord and their respective counsel have engaged in numerous without prejudice meetings
and conference calls to discuss a possible settlement. As of the date of this report, the Company
has not yet been able to reach a mutually agreeable settlement with the Landlord. The Monitor
understands that if TravelBrands is not able to reach a settlement with the Landlord in the short-
term, that may determine whether the Company seeks approval of the Sales Process (as defined
below) or seeks to present a plan of compromise or arrangement to its creditors.
REVIEW OF 2224855 ONTARIO INC.’S SECURITY
34. On May 1, 2013, the Company granted a general security agreement in favour of Holdco
to secure the payment and performance of the Company’s indebtedness, liabilities and obligations
incurred or to be incurred to Holdco from time to time (the “Security Agreement”). A copy of
the Security Agreement is attached to the Initial Order Affidavit as Exhibit “O”. On April 26,
2013, Holdco registered a financing statement in the Personal Property Security Registry in
Ontario. On May 26, 2015, Holdco registered a financing statement in the Personal Property
Security Registry in British Columbia. Also, on May 26, 2015, TravelBrands delivered a movable
hypothec agreement dated as of May 26, 2015 made by TravelBrands in favour of Holdco (the
“Hypothec Agreement”). The Hypothec Agreement was registered in the Register of Personal
and Movable Rights of Quebec on the same date.
35. The Monitor requested that Stikeman review the Security Agreement, the Hypothec
Agreement and the related loan documentation and provide an independent security opinion to the
Monitor. Stikeman has delivered written opinions to the Monitor that conclude, subject to the
usual assumptions and qualifications contained therein, that as of May 27, 2015 (the date of the
CCAA filing):
a. The Security Agreement would be valid and enforceable against the bankrupt estate of
TravelBrands under the laws of the Provinces of Ontario and British Columbia;
12
b. The Security Agreement created a valid security interest pursuant to the laws of Ontario
and British Columbia in favour of Holdco in the personal property described in the
Security Agreement as being secured thereby in which TravelBrands had rights at such
date, to secure payment and performance of the obligations described in the Security
Agreement as being secured by it;
c. Registration has been made in all public offices provided for under the laws of the
Provinces of Ontario and British Columbia where such registration is necessary to perfect
the security interests created by the Security Agreement with respect to the personal
property of TravelBrands;
d. The Hypothec Agreement would be valid and enforceable against the bankrupt estate of
TravelBrands under the laws of the Province of Quebec;
e. The Hypothec Agreement created a valid hypothec pursuant to the laws of the Province
of Quebec in the aggregate principal amount of $78,000,000 with interest thereon at the
rate of 25% per annum in favour of Holdco in the movable property described in the
Hypothec Agreement as being secured thereby in which TravelBrands had rights at such
date and which consists of corporeal movable property of TravelBrands (other than
corporeal moveable property of TravelBrands not ordinarily used in more than one
jurisdiction) and incorporeal movable property of TravelBrands established by a title in
bearer form, the whole situate in the Province of Quebec, and financial assets of
TravelBrands held in a securities account or securities to the extent that the internal laws
of the Province of Quebec would apply to such matters, to secure payment and
performance of the obligations described in the Hypothec Agreement as being secured by
it; and
f. The Hypothec Agreement has been registered in all places in the Province of Quebec as
are currently necessary to render the hypothecs created pursuant thereto opposable to
third parties.
36. The Monitor has reviewed the searches conducted against TravelBrands and subject to
statutory and possessory liens, security interests perfected by possession or control, purchase
money security interests, rights of certain motor vehicle and equipment lessors and claims that
13
have priority by operation of law, it appears that BMO has a first ranking security interest, and
Holdco has a second ranking security interest, in all present and after acquired personal property
of TravelBrands.
37. A copy of the security opinions will be provided to the Court upon request. Stikeman will
provide a copy of the security opinions to any interested party requesting a copy who confirms in
advance that: (a) such party is not Stikeman’s client and therefore is not entitled to rely upon the
opinion and that Stikeman has no liability or responsibility to such party with respect to any loss,
liability, damage or expense in connection with the provision to such party of the opinion or such
party’s review of the contents thereof; (b) such party will not disclose the opinion to any other
party; and (c) the provision of the opinion does not constitute a waiver of privilege.
38. The Monitor reviewed the grant of security by TravelBrands to Holdco in light of section
36.1 of the CCAA and considered whether such grant of security constituted a preference or a
transfer at undervalue pursuant to sections 95 and 96 of the Bankruptcy and Insolvency Act,
respectively. Following its review, the Monitor is of the view that the grant of security does not
constitute a preference or a transfer at undervalue.
UPDATE ON PROPOSED SALE PROCESS
39. As discussed in the Pre-Filing Report and the First Report, the Company is considering
initiating a sale process whereby prospective purchasers will have the opportunity to bid for all of
the Company’s assets (the “Sale Process”). The contemplated Sale Process, if commenced, would
permit Holdco to submit a credit bid in respect of some or all of its secured debt.
40. Given TravelBrands’ progress in its restructuring efforts since the commencement of the
CCAA Proceedings, including entering into the Amending Agreement with Sears and the ongoing
discussions with respect to a possible settlement between the Company and the Landlord, the
Company, in consultation with the Monitor, is currently considering whether the restructuring
could also be achieved by way of a plan of compromise and arrangement, which may enable
TravelBrands to benefit from the preservation of certain tax attributes. The Monitor is working
with the Company to evaluate that option.
14
41. However, as described above, if a mutually agreeable settlement is not reached between
the Company and the Landlord in the short-term, TravelBrands’ will seek this Court’s approval to
commence the Sale Process.
CASH FLOW RESULTS RELATIVE TO FORECAST
42. Cash receipts and disbursements for the eight-week period ended August 7, 2015 (the
“Reporting Period”), as compared to the June Cash Flow Forecast (filed in the First Report) are
summarized in the table below:
43. As at August 7, 2015, the aggregate balance in TravelBrands’ trust accounts was
approximately $3.0 million greater than projected in the June Cash Flow Forecast. The Company’s
operating cash was approximately $0.6 million greater than forecast.
15
44. Senior Management attributes the favourable trust cash variance to lower than anticipated
supplier payments out of trust monies during the Reporting Period (payments to suppliers which
are required prior to a customer’s departure) and the timing of completion of customer travel which
triggers surplus trust monies to be released into operating cash for use by the Company to pay its
other obligations. These timing differences were partially offset by lower than forecast customer
deposits from new bookings during the Reporting Period. It is anticipated that the variances in the
supplier payments and transfers from trust will reverse in the coming weeks as customers return
from summer travel in August and early September.
45. The slightly greater than forecast operating cash balance is attributed by Senior
Management to supplier payments being less than forecast, which is partially offset by lower than
forecast accounts receivable collections and cash transfers from trust due to the timing of customer
travel. As mentioned above, it is expected that the amount of monies being released from trust
should begin to increase in the coming weeks.
46. Further detail of the actual receipts and disbursements during the Reporting Period, as
compared to the June Cash Flow Forecast is attached hereto as Appendix “D”.
47. The Initial Order entitled TravelBrands to continue to utilize the existing Cash
Management System, as described in the Pre-Filing Report. The Cash Management System
continues to operate in the same manner as described in the Initial Order Affidavit.
UPDATED CASH FLOW FORECAST
48. The Company, with the assistance of the Monitor, has prepared an updated 17-week cash
flow forecast for the period from August 8, 2015 to November 6, 2015 (the “Forecast Period”).
A copy of the August Cash Flow Forecast, together with Notes and Summary of Assumptions is
attached as Appendix “E”. A summary of the August Cash Flow Forecast is set out in the
following table:
16
49. The Monitor notes the following in respect of the August Cash Flow Forecast:
a. The Company’s cash position as at August 7, 2015 was approximately $16.7 million of
cash held in trust and approximately $8.1 million of operating cash;
b. In respect of operating cash, TravelBrands’ August Cash Flow Forecast estimates that
during the Forecast Period, TravelBrands will have total receipts of approximately $30.1
million and total disbursements of approximately $25.8 million resulting in net cash inflow
of approximately $4.3 million;
c. The August Cash Flow Forecast includes an expected cash inflow from Red Label of $2
million pursuant to the Commitment Agreement (half of the $4 million available under the
agreement) June Cash Flow Forecast. Based on the August Cash Flow Forecast, the
TravelBrands Inc. Weekly cash flow forecast TotalFor the period August 8 to November 6, 2015 13 WeeksPresented in thousands of Canadian dollars (000's)
CASH IN TRUST
Cash receiptsInflows from customer deposits for travel services 109,000
Cash disbursementsOutflows to travel and other suppliers (80,500)
Net trust cash flow 28,500
Opening balance of cash in trust 16,721 Net trust cash flow 28,500 Outflows to operating cash (22,640)
Ending balance of cash in trust 22,580
OPERATING CASH
Cash receiptsInflows from accounts receivable and customer rebates 7,492 Inflows from cash in trust 22,640
Total operating cash receipts 30,132
Cash disbursements(25,849)
Net operating cash flow 4,284
Opening balance of operating cash 8,080 Net operating cash flow 4,284 Red Label funding (Commitment Agreement) 2,000
Closing balance of operating cash 14,363
Outflows to travel suppliers, rent, payroll, professional fees and other vendors
17
Company is projected to have sufficient liquidity during the Forecast Period; however, the
funding has been included to ensure that the Company is in continued compliance with
working capital covenants required by the TICO, IATA and BMO.
d. During the Forecast Period, the Monitor understands that the Company will continue to
make payments for goods and services supplied post-filing, as permitted by the Initial
Order.
e. Pursuant to the Initial Order, the Monitor understands the Company will continue to pay
all amounts, whether incurred pre or post filing, owing to travel agents and, with the
consent of the Monitor and Red Label, certain pre-filing payments to those key suppliers
that the Company considers to be critical to the business.
REQUEST FOR EXTENSION OF STAY PERIOD
50. The Stay Period will expire on August 17, 2015. The Company is seeking an extension of
the Stay Period to September 30, 2015.
51. In the Monitor’s opinion, to date the Company has been acting in good faith in an effort to
further its restructuring objectives. Senior Management has provided the Monitor with full co-
operation and unrestricted access to the Company’s premises, books and records.
52. The Company, with the assistance of the Monitor, continues to operate its business in the
normal course with the benefit of the stay of proceedings, which has provided stability to the
business and alleviated the liquidity crisis that TravelBrands faced at the time of filing the
application for the Initial Order.
53. The Monitor supports the Company’s motion to extend the stay period to September 30,
2015, for the following reasons:
a. The Company continues to operate in the normal course;
b. The Company has successfully renegotiated its license agreement with Sears;
c. The Company is working with IATA to address compliance with the IATA Financial
Covenants;
18
d. The Company is continuing to provide periodic reporting to TICO as required;
e. The Company is working cooperatively with the Landlord and requires additional time to
engage in further discussions with the Landlord and its counsel towards a mutually
agreeable settlement, or if such discussions are not ultimately successful, to provide time
for the Company to seek Court approval of the Sale Process; and
f. The funding from Red Label pursuant to the Commitment Agreement remains available to
the Company; although the August Cash Flow Forecast indicates that the Company may
not require that funding to satisfy ongoing operating costs during the proposed extension
of the Stay Period.
MONITOR’S RECOMMENDATION
54. For the reasons set out in this Second Report, the Monitor recommends that the Court grant
the Company’s request for an extension of the Stay Period until September 30, 2015.
All of which is respectively submitted to this Honourable Court this 13th day of August, 2015.
KPMG Inc., in its capacity as Monitor of TravelBrands Inc.
Per: Philip J. Reynolds Senior Vice President
Appendix A
Court File No. CV-15-10980-00CL
ONTARIO SUPERIOR COURT OF JUSTICE
COMMERCIAL LIST
IN THE MATTER OF THE COMPANIES' CREDITORS ARRANGEMENT ACT, R.S.C. 1985, c. C-36, AS AMENDED
AND IN THE MATTER OF A PLAN OF COMPROMISE OR ARRANGEMENT OF TRAVELBRANDS INC.
FIRST REPORT OF THE MONITOR KPMG INC.
DATED JUNE 23, 2015
TABLE OF CONTENTS
INTRODUCTION 4
PURPOSE 4
TERMS OF REFERENCE 5
ACTIVITIES OF THE MONITOR SINCE ITS APPOINTMENT 6
UPDATE REGARDING CERTAIN KEY STAKEHOLDERS 7
UPDATE ON THE RESTRUCTURING AND PROPOSED SALE PROCESS 11
CASH FLOW RESULTS RELATIVE TO FORECAST 12
UPDATED CASH FLOW FORECAST 13
REQUEST FOR AN EXTENSION OF THE STAY PERIOD 15
MONITOR'S RECOMMENDATION 16
2
INDEX TO APPENDICES
Appendix A — The Initial Order dated May 27, 2015
Appendix B — Notice to Creditors dated June 1, 2015
Appendix C — Advertisements in the Globe and Mail dated June 3, 2015 and June 10, 2015
Appendix D — Monitor's letter to Manulife Financial Corporation dated June 4, 2015
Appendix E — Actual receipts and disbursements for the four-week period ended June 12, 2015
Appendix F — Updated cash flow forecast for the 13-week period June 13 to September 11, 2015
3
INTRODUCTION
1. On May 27, 2015, TravelBrands Inc. ("TravelBrands" or the "Company") filed an
application before the Ontario Superior Court of Justice (Commercial List) (the "Court") under
the Companies' Creditors Arrangement Act, R.S.C. 1985, c. C-36, as amended (the "CCAA").
2. On the same date, this Court granted an initial order (the "Initial Order") which provides
for, among other things, the appointment of KPMG Inc. as Monitor of the Company ("KPMG" or
the "Monitor") in the CCAA proceedings (the "CCAA Proceedings") and a stay of proceedings
until June 26, 2015, or such later date as this Court may order (the "Stay Period"). A copy of the
Initial Order is attached hereto as Appendix "A".
3. In connection with the Company's application for protection under the CCAA, KPMG in
its capacity as the proposed monitor, provided the Court with a pre-filing report (the "Pre-Filing
Report") dated May 27, 2015.
PURPOSE
4. The purpose of this first report of the Monitor (the "First Report") is to provide the Court
with information on the following:
a. The Monitor's activities since the issuance of the Initial Order;
b. An update regarding some of the Company's key stakeholders;
c. The Company's restructuring and proposed sale process;
d. The Company's actual receipts and disbursements for the four-week period ended June 12,
2015, as compared to the Cash Flow Forecast previously filed as part of the Pre-Filing
Report (the "Original Cash Flow Forecast");
e. TravelBrands' updated cash flow forecast for the period June 13 to September 11, 2015
(the "Updated Cash Flow Forecast");
f. The Company's request for an extension of the Stay Period until August 17, 2015; and
g. The Monitor's recommendation.
4
TERMS OF REFERENCE
5. In preparing this First Report and making the comments herein, the Monitor has been
provided with, and has relied upon, unaudited financial information, books and records and
financial information prepared by the Company, discussions with management of the Company
("Senior Management") and information from other third-party sources (collectively, the
"Information"). Except as otherwise described in this First Report in respect of TravelBrands'
cash flow forecast:
a. The Monitor has reviewed the Information for reasonableness, internal consistency and use
in the context in which it was provided. However, the Monitor has not audited or otherwise
attempted to verify the accuracy or completeness of the Information in a manner that would
wholly or partially comply with Generally Accepted Assurance Standards pursuant to the
Chartered Professional Accountants Canada Handbook and, accordingly, the Monitor
expresses no opinion or other form of assurance in respect of the Information; and
b. Some of the information referred to in this First Report consists of forecasts and
projections. An examination or review of the financial forecasts and projections, as
outlined in the Chartered Professional Accountants Canada Handbook, has not been
performed.
6. Future oriented financial information referred to in this First Report was prepared based on
Senior Management's estimates and assumptions. Readers are cautioned that since projections are
based upon assumptions about future events and conditions that are not ascertainable, the actual
results will vary from the projections. Even if the assumptions materialize, the variations could be
significant.
7. Additional information regarding the matters discussed herein is set forth in the affidavit
of Joe DeMarinis sworn June 18, 2015 (the "DeMarinis Affidavit").
8. Capitalized terms not defined in this First Report are defined in the affidavit of Francesco
DeMarinis sworn May 26, 2015 (the "Initial Order Affidavit"), the Pre-Filing Report, the Initial
Order or the DeMarinis Affidavit.
5
9. Unless otherwise stated all monetary amounts contained herein are expressed in Canadian
dollars.
ACTIVITIES OF THE MONITOR SINCE ITS APPOINTMENT
10. The Monitor established a website for these CCAA Proceedings:
www.kpmg.com/ca/TravelBrands (the "Monitor's Website"). Copies of the Monitor's reports,
issued orders and other Court material filed in connection with these CCAA proceedings are
available on the Monitor's Website.
11. Pursuant to paragraph 45 of the Initial Order, the Monitor:
a. Mailed a notice of the CCAA Proceedings (the "Notice to Creditors") to all known
creditors who may have a claim of more than $1,000 against TravelBrands, within five
business days of the issuance of the Initial Order. A copy of the Notice to Creditors dated
June 1, 2015 is attached hereto as Appendix "B";
b. Caused a notice containing the information prescribed by section 23 of the CCAA to be
published in the Wednesday June 3, 2015 and Wednesday June 10, 2015 editions of the
Globe & Mail (National Edition). Copies of the publications are attached hereto as
Appendix "C"; and
c. Prepared and posted on the Monitor's Website a list of every known creditor of the
Company who may have a claim of more than $1,000, including the names and addresses
of those creditors and the estimated amounts of their claims based on the books and records
of the Company.
12. The Monitor published contact information in the Notice to Creditors and on the Monitor's
Website to enable creditors or other interested parties to contact the Monitor and obtain additional
information concerning the CCAA Proceedings. Representatives of the Monitor have received
and responded to a number of telephone calls, emails and inquiries from pre-filing creditors and
other stakeholders since the date of the Initial Order.
6
13. The Monitor has established a process with Senior Management whereby the Monitor is
reviewing and approving all disbursements before they are made. The Monitor has also established
a process to monitor the Company's operating and trust account balances on a daily basis.
14. The Monitor reviewed the Initial Order Affidavit and has had discussions with Senior
Management regarding the business and affairs of the Company. Based on the foregoing, the
Monitor is of the view that the Initial Order Affidavit provides a fair summary of the business and
affairs of TravelBrands and the causes of its insolvency.
UPDATE REGARDING CERTAIN KEY STAKEHOLDERS
Suppliers and Travel Agents
15. Since the date of the Initial Order, the Company, in consultation with the Monitor, has been
in contact with a large number of suppliers to ensure the continued supply of goods and services
to the Company. TravelBrands sent email correspondence to and telephoned key travel agents to
advise them of the CCAA Proceedings and the Company's intention to pay all travel agents all
outstanding amounts owing to them in the normal course. The Monitor has also had discussions
with a number of travel agents to confirm the Company's intention in this regard.
16. To date, the Company's suppliers have continued to support the Company through the
provision of ongoing travel services since the commencement of the CCAA Proceedings.
TravelBrands, in consultation with the Monitor, has made arrangements with certain key suppliers
regarding go-forward supply and payments terms. The Company, with the assistance of the
Monitor, continues to be in discussions with its critical suppliers, as required, in order to ensure
that there is no disruption in supply of travel services and no impact on TravelBrands' customers.
As provided for in the Initial Order, TravelBrands continues to pay its suppliers of travel services
all amounts owing for goods and services supplied to the Company since the date of the Initial
Order.
17. In accordance with the Initial Order, the Company has continued to pay travel agents in the
ordinary course for services supplied to the Company prior to and during the CCAA Proceedings
in connection with the Company's sale of wholesale travel products.
7
Manulife Financial
18. Manulife Financial Corporation ("Manulife") underwrites trip cancellation and
interruption insurance purchased by a number of TravelBrands' customers. On May 29, 2015,
Manulife issued a notice regarding the impact of the Company's CCAA Proceedings on the default
protection coverage which is provided under the above-noted insurance.
19. The Company and the Monitor worked with Manulife to provide clarification regarding
the Company's CCAA Proceedings. On June 4, 2015, the Monitor issued a letter to Manulife
confirming, among other things, that there has been no cessation in the Company's business and
that TravelBrands holds all funds received from customers for travel services not yet rendered in
trust accounts for the benefit of such customers in the event that the travel service is not delivered
or the customer cancels the travel service. A copy of the Monitor's letter to Manulife is attached
hereto as Appendix "D".
20. Following receipt of the Monitor's letter, Manulife issued an update which clarified certain
aspects of its notice, including that a default event had not occurred in respect of TravelBrands and
that the default protection coverage under the trip cancellation and interruption insurance was still
in effect.
Travel Industry Council of Ontario
21. Senior Management and the Monitor and its counsel have met with representatives of the
Travel Industry Council of Ontario ("TICO") and its counsel a number of times since the
commencement of the CCAA Proceedings. TICO has implemented a monitoring regime with the
Company, in particular with respect to the status and ongoing reporting of the trust accounts
maintained for the protection of the Company's customers, and otherwise, has required ongoing
reporting and continued compliance with TICO's regulations.
22. In the course of the discussions, TICO noted that the three Court-ordered priority charges,
the Administration Charge, the Directors' Charge and the Intercompany Charge (collectively, the
"Charges") provided pursuant to the Initial Order, could be interpreted to apply to customer trust
funds. Although it is the view of the Company and the Monitor that customer trust funds do not
constitute property of the Company, for greater clarity and assurance to customers and TICO, the
8
Company, in consultation with the Monitor, proposed certain amendments to the Initial Order,
subject to the approval of the Court, which specifically carve out customer trust funds from the
property to which the Charges attach. The Monitor understands that these amendments confirm
but do not change the intended treatment of the Charges under the Initial Order. As such, the
Monitor considers the amendments to have no impact on any other stakeholders.
International Air Transport Association
23. The Company, the Monitor and their respective counsel have also been in contact with
International Air Transport Association ("IATA") and its counsel with respect to the CCAA
Proceedings. On June 16, 2015, counsel to the Company and the Monitor received correspondence
from McMillan LLP ("McMillan"), counsel to IATA (the "IATA Correspondence"). In the
IATA Correspondence IATA takes the position that the Company is currently not compliant with
certain financial criteria (the "IATA Financial Covenants") which are required in order for the
Company to be in good standing with respect to IATA's "billing and settlement plan" (the "BSP").
The BSP is a system designed to facilitate and simplify the selling, reporting and remitting
procedures of IATA accredited passenger sales agents, as well as improve financial control and
cash flow for BSP airlines. The BSP provides the Company with an efficient mechanism for the
payment of all member airlines rather than being required to have a separate bi-lateral agreement
with each airline.
24. The IATA Correspondence states that in order for the Company to become compliant with
the IATA Financial Covenants, the Company must either: (a) provide IATA with satisfactory
financial statements from its external accountants demonstrating that the Company is compliant;
or (b) increase the amount of an existing letter of credit required by IATA.
25. McMillan has confirmed to the Company and the Monitor that it will provide the Company
with some time in order to resolve its compliance issues and will not revoke any of the Company's
participation rights in the BSP at this time. In the meantime, the Company is working to resolve
the question of its compliance with the IATA Financial Covenants and remains in discussions with
McMillan. The Monitor is involved in these discussions.
9
Bank of Montreal
26. As described in the Initial Order Affidavit, TravelBrands has certain credit facilities with
the Bank of Montreal ("BMO") including: (a) a revolving credit facility for the issuance of letters
of credit; (b) a corporate MasterCard facility; and (c) a treasury facility. In addition, the
Company's parent company, Red Label, has a revolving operating line with BMO.
27. Following the date of the Initial Order, TravelBrands and its counsel and the Monitor met
with representatives of BMO and its counsel to discuss the Company's CCAA Proceedings as well
as BMO's ongoing support of the Company's operations. BMO has requested, and the Company
has agreed to provide with the assistance of the Monitor, additional weekly and monthly reporting
including, among other things, regular cash flow reporting throughout the pendency of the CCAA
Proceedings. The Company and the Monitor continue to have ongoing discussions with BMO to
update them on the status of the Company's restructuring efforts.
28. As described in the DeMarinis Affidavit, as part of those discussions, BMO identified a
potential settlement exposure in respect of wires, Automatic Clearing House ("ACH") transactions
and Electronic Fund Transfers ("EFT"). The nature of the potential settlement risk relates to the
approximately 24-hour delay from the time that TravelBrands initiates an ACH transaction or EFT
and the time that BMO takes the money out of the Company's BMO account. There is no such
delay with wire transfers. BMO advised that it was specifically concerned about this settlement
exposure in the event of a bankruptcy of the Company during the 24-hour delay period.
29. In order to address BMO's concerns, the Company has agreed to seek an order of the Court
whereby: (a) neither a bankruptcy, receivership nor any other occurrence whatsoever shall impact
the settlement of any ACH transaction or EFT released by BMO on the Company's behalf; and (b)
no motion for a bankruptcy or receivership of the Company shall be made by the Company, Red
Label or Holdco without two days' advance notice to BMO. The Monitor is of the view that the
order being sought by the Company in this regard is appropriate in the circumstances as it will
allow the Company to continue to issue payments to its suppliers without interruption.
1 0
UPDATE ON THE RESTRUCTURING AND PROPOSED SALE PROCESS
75 Eglinton Leased Property
30. As discussed in the Pre-Filing Report, the Company anticipated that it may disclaim the 75
Eglinton lease due to the strain of the related financial obligations on the Company's cash flow.
On May 29, 2015, the Company, with the consent of the Monitor, delivered a disclaimer notice to
the 75 Eglinton landlord. Following delivery of the disclaimer notice, the 75 Eglinton landlord
obtained, with TravelBrands' consent, an order allowing it to, among other things, market the
premises to prospective tenants.
31. Further, as described in the DeMarinis Affidavit, the 75 Eglinton landlord has requested
and the Company has agreed to seek an order whereby all right, title and interest of the Company
in the property, assets and undertaking of TravelBrands located at 75 Eglinton will vest in the 75
Eglinton landlord free and clear of all claims against such property. The Monitor understands that
the property of the Company located at 75 Eglinton is of little or no value or would be costly to
remove, and therefore the vesting of such property in the 75 Eglinton landlord will not have a
material adverse impact on other stakeholders.
Negotiations with Sears
32. As reported in the Pre-Filing Report, it was contemplated that the Company would pursue
further negotiations with Sears in order to mitigate the negative financial impact of the Amended
Sears Agreement. If the negotiations were not successful, it was anticipated that the Company
might disclaim the Amended Sears Agreement. As described in the DeMarinis Affidavit, since
the date of the Initial Order, the Company has engaged in constructive negotiations with Sears
regarding a potential go-forward business arrangement. In support of those negotiations, Sears
has agreed to waive the daily amounts accruing due under the Amended Sears Agreement during
the negotiation period. Recently, the Company put forward the principles of a deal which Sears is
currently in the process of evaluating.
1 1
Proposed Sale Process
33. As discussed in the Pre-Filing Report, the Company is considering a sale process (the "Sale
Process") whereby prospective purchasers will have the opportunity to bid for all of the
Company's assets. The Company requires additional time to finalize the proposed structure of the
Sale Process and the potential of utilizing a stalking horse asset purchase agreement as part of such
process. The Monitor is working with the Company with respect to the formulation of the Sale
Process. The Company expects to return to Court in early July to seek approval of the Sale Process.
CASH FLOW RESULTS RELATIVE TO FORECAST
34. Cash receipts and disbursements for the four week period ended June 12, 2015 (the
"Reporting Period"), as compared to the Original Cash Flow Forecast are summarized in the table
below:
TravalBrands Inc. Summary of AMnal Receipts and Disbursements For the four week period ending June 12,2015 Presented in thousands of Canadian dollars (000's) Week ending
Total Forecast
12-Jun-16
Total Actual.
12-Jan-16
Variance Actual v. Forecast
CASH IN TRUST
Cash receipts Inflows from customer deposits for travel services 37,325 32,932 (4,393)
Cash disbursements Outlflows to travel and other suppliers (22,502) (21,004) 1,498
Net trust cash flow 14,823 11,928
Opening balance of cash in treat 15,514 15,514 Net trust cash flow 14,823 11,928 (2,895) Outflows to operating cash (15,291) (7,505) 7,786
Ending balance of cash in trust 15,047 19,938 4,891
OPERATING CASH
Cash receipts Inflows from cash in trust 15,291 7,505 (7,786) Inflows from accounts receivable, customer rebates and rental sublease 3,142 4,434 1,293
Total operating cash receipts 2 11,939 (6,493)
Cash disbursements Outflows to travel suppliers, rent, payroll, professional fees and other vendors (20,811) (11,426) 9,385
Net operating cash flow (2,379) 513 2,892
Opening balance of operating cash 4,619 4,619 Net operating cash flow (2,379) 513 2,892 Red Label funding (Commitment Agreement)
Closing balance of operating cask 2,240 5,132 2,892
12
35. As at June 12, 2015, the aggregate balance in TravelBrands' trust accounts totaled $4.9
million greater than projected in the Original Cash Flow Forecast. The Company's operating cash
was $2.9 million greater than forecast.
36. Senior Management attributes the favourable trust cash variance to lower than anticipated
supplier payments out of trust monies during the Reporting Period (payments to suppliers which
are required prior to a customer's departure) and the timing of completion of customer travel which
triggers surplus trust monies to be released into operating cash for use by the Company to pay its
other obligations. These timing differences were partially offset by lower than forecast customer
deposits from new bookings during the Reporting Period. It is anticipated that the variances in the
supplier payments and the transfers from trust will reverse in the coming weeks as customer travel
is completed.
37. The greater than forecast operating cash balance is attributed by Senior Management to
supplier payments being less than forecast, slightly higher accounts receivable and other
collections, offset by the timing of monies being released from trust. It is anticipated that some of
the variance in supplier payments will reverse in the coming weeks.
38. The Company's net cash flow during the Reporting Period was significantly favourable to
the Original Cash Flow Forecast. Further detail of the actual receipts and disbursements during the
Reporting Period, as compared to the Original Cash Flow Forecast is attached hereto as Appendix “E99 .
39. The Initial Order entitled TravelBrands to continue to utilize the existing Cash
Management System, as described in the Pre-Filing Report. The Cash Management System
continues to operate in the same manner as described in the Initial Order Affidavit.
UPDATED CASH FLOW FORECAST
40. The Company, with the assistance of the Monitor, has prepared an updated 13-week cash
flow forecast for the period from June 13, 2015 to September 11, 2015 (the "Cash Flow Period").
A copy of the Updated Cash Flow Forecast, together with Notes and Summary of Assumptions is
attached as Appendix "F". A summary of the Updated Cash Flow Forecast is set out in the
following table:
13
TravelBrands Inn Updated Calk Flow Forecast For the period June 13 to September II, 2016 Presented in thousands of Canadian dollars (40O's)
Total 13 weeks
CASH IN TRUST
Cash receipts Inflows from customer deposits for travel services 11 7,752
Cash disbursements ()naives to travel and other supplier, (84,174)
Net trust cash flow 33,578
Opening balance of cash in trust 19,933 Net trust cash flow 33,578 Outflows to operating cash (38,771)
Ending balance of mats in trait 14,745
OPERA:11NC CASH
Cash receipts 38,771 Inflows from cash in trust
Inflows from accounts receivable, customer rebates and rental sublease 7,960 Total operating cash receipts 46,731
Cash disbursements Outflows to travel suppliers, rent, payroll, professional fees and other vendors (43,564)
Net operating cash flow 3,167
Opening balance of operating cash 5,132 Net operating cash flow 3,167 Red Label foams (Commitment Agra:rant) 4,000
Closing balance of operating cash 12,299
41. The Monitor notes the following in respect of the Updated Cash Flow Forecast:
a. The Company's cash position as at June 12, 2015 was approximately $19.9 million of cash
held in trust and $5.1 million of operating cash;
b. In respect of the operating cash, TravelBrands' Updated Cash Flow Forecast estimates that
during the Cash Flow Period, TravelBrands will have total receipts of approximately $46.7
million and total disbursements of approximately $43.6 million resulting in net cash inflow
of approximately $3.2 million;
c. The Updated Cash Flow Forecast includes the expected cash inflow from Red Label of $4
million pursuant to the Commitment Agreement which was contemplated in the Original
Cash Flow Forecast. Based on the Updated Cash Flow Forecast, the Company may not
require funding from Red Label to satisfy ongoing operating costs, however, the funding
14
has been included in the Updated Cash Flow Forecast to provide the Company additional
liquidity in the event that cash flow timing varies from forecast. In the week ended July 26,
2015 the forecast cash balance (prior to any funding from Red Label) is $0.5 million. In
order to ensure that ample cash reserves are available to the Company, the $4 million
funding pursuant to the Commitment Agreement has been reflected in the cash flow that
week.
d. During the Cash Flow Period, the Monitor understands that the Company will continue to
make payments for goods and services supplied post-filing, as permitted by the Initial
Order.
e. Pursuant to the Initial Order the Monitor understands the Company will continue to pay all
amounts, whether incurred pre or post-filing, owing to travel agents and, with the consent
of the Monitor and Red Label, certain pre-filing payments to those key suppliers that the
Company considers to be critical to the business.
REQUEST FOR AN EXTENSION OF THE STAY PERIOD
42. The Stay Period is to expire on June 26, 2015. The Company is seeking an extension of
the Stay Period to August 17, 2015.
43. To date, the Company has been acting in good faith in an effort to further its restructuring
objectives. Senior Management has provided the Monitor with full co-operation and unrestricted
access to the Company's premises, books and records.
44. The Company, with the assistance of the Monitor, has worked through the initial weeks of
the CCAA Proceedings and continues to operate its business in the ordinary course with the benefit
of the Stay Period, which has provided stability to the business and alleviated the liquidity crisis
that TravelBrands faced at the time of filing the application for the Initial Order.
45. The Monitor supports the Company's motion to extend the stay period to August 17, 2015
for the following reasons:
a. The Company continues to operate in the ordinary course;
15
b. The Company is working cooperatively with Sears and requires additional time to engage
in further negotiations with Sears and its counsel in order to reach a resolution; whether it
is a long-term consensual agreement that enables the parties to continue a business
relationship or the terms under which that relationship will end;
c. The Company requires additional time to finalize the Sale Process; and
d. The funding from Red Label pursuant to the Commitment Agreement remains available to
the Company; although, the Updated Cash Flow Forecast indicates that the Company may
not require that funding to satisfy ongoing operating costs during the proposed extension
of the Stay Period.
MONITOR'S RECOMMENDATION
46. For the reasons set out in this First Report, the Monitor recommends that the Court grant
the Company's request for an extension of the Stay Period until and including August 17, 2015.
All of which is respectively submitted to this Honourable Court this 23r d day of June, 2015.
KPMG Inc., in its capacity as Monitor of TravelBrands Inc.
Per: Philip J. Reynolds Senior Vice President
16
THE HONOURABLE MR. WEDNESDAY, THE 27 TH
JUSTICE NEWBOULD
DAY OF MAY, 2015
IN THE MATTER OF THE COMPANIES' CREDITORS ARRANGEMENT ACT, R.S.C. 1985, c. C-36, AS AMENDED
D IN THE MATTER OF A PLAN OF COMPROMISE OR GEMENT OF TRAVELBRANDS INC. (the
pplicant")
Court File No.
ONTARIO SUPERIOR COURT OF JUSTICE
(COMMERCIAL LIST)
INITIAL ORDER
THIS APPLICATION, made by the Applicant, pursuant to the Companies' Creditors
Arrangement Act, R.S.C. 1985, c. C-36, as amended (the "CCAA") was heard this day at 330
University Avenue, Toronto, Ontario.
ON READING the affidavit of Francesco DeMarinis sworn May 26, 2015 (the
"DeMarinis Affidavit") and the Exhibits thereto and the pre-filing report dated May 26, 2015 of
KPMG Inc. ("KPMG") in its capacity as the Proposed Monitor of the Applicant (the "Pre-
Filing Report"), and on being advised that the secured creditors who are likely to be affected by
the charges created herein were given notice, and on hearing the submissions of counsel for the
Applicant and KPMG and on reading the consent of KPMG to act as the Monitor,
- 2 -
SERVICE
1. THIS COURT ORDERS that the time for service of the Notice of Application and the
Application Record is hereby abridged and validated so that this Application is properly
returnable today and hereby dispenses with further service thereof
APPLICATION
2. THIS COURT ORDERS AND DECLARES that the Applicant is a company to which
the CCAA applies.
PLAN OF ARRANGEMENT
3. THIS COURT ORDERS that the Applicant shall have the authority to file and may,
subject to further order of this Court, file with this Court a plan of compromise or arrangement
(hereinafter referred to as the "Plan").
POSSESSION OF PROPERTY AND OPERATIONS
4. THIS COURT ORDERS that the Applicant shall remain in possession and control of its
current and future assets, undertakings and properties of every nature and kind whatsoever, and
wherever situate including all proceeds thereof (the "Property"). Subject to further Order of this
Court, the Applicant shall continue to carry on business in a manner consistent with the
preservation of its business (the "Business") and Property. The Applicant is authorized and
empowered to continue to retain and employ the employees, consultants, agents, experts,
accountants, counsel and such other persons (collectively "Assistants") currently retained or
employed by it, with liberty to retain such further Assistants as it deems reasonably necessary or
desirable in the ordinary course of business or for the carrying out of the terms of this Order.
5. THIS COURT ORDERS that the Applicant shall be entitled to continue to utilize the
central cash management system currently in place as described in the DeMarinis Affidavit or
replace it with another substantially similar central cash management system (the "Cash
Management System") and that any present or future bank providing the Cash Management
System shall not be under any obligation whatsoever to inquire into the propriety, validity or
legality of any transfer, payment, collection or other action taken under the Cash Management
- 3 -
System, or as to the use or application by the Applicant of funds transferred, paid, collected or
otherwise dealt with in the Cash Management System, shall be entitled to provide the Cash
Management System without any liability in respect thereof to any Person (as hereinafter
defined) other than the Applicant, pursuant to the terms of the documentation applicable to the
Cash Management System, and shall be, in its capacity as provider of the Cash Management
System, an unaffected creditor under the Plan with regard to any claims or expenses it may suffer
or incur in connection with the provision of the Cash Management System.
6. THIS COURT ORDERS that the Applicant shall be entitled but not required to pay the
following expenses whether incurred prior to or after this Order:
(a) all outstanding and future wages, salaries, employee and pension benefits, vacation
pay and expenses payable on or after the date of this Order, in each case incurred in
the ordinary course of business and consistent with existing compensation policies
and arrangements;
(b) 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;
(c) the fees and disbursements of any Assistants retained or employed by the Applicant
in respect of these proceedings, at their standard rates and charges; and
(d) with the consent of the Monitor and Red Label Vacations Inc. ("Red Label"),
amounts owing for goods and services actually supplied to the Applicant prior to the
date of this order or to obtain the delivery of services contracted for prior to the date
of this order by suppliers of hotel, cruise-line, car rental and airline leisure travel
services that, in the opinion of the Applicant, are critical to the Business; and
(e) any other costs and expenses that are deemed necessary for the preservation of the
Property and/or Business by the Applicant with the consent of the Monitor and Red
Label.
7. THIS COURT ORDERS that, except as otherwise provided to the contrary herein, the
Applicant shall be entitled but not required to pay all reasonable expenses incurred by the
- 4 -
Applicant in carrying on the Business in the ordinary course after this Order, and in carrying out
the provisions of this Order, which expenses shall include, without limitation:
(a) all expenses and capital expenditures reasonably necessary for the preservation of the
Property or the Business including, without limitation, payments on account of
insurance (including directors and officers insurance), maintenance and security
services; and
(b) payment for goods or services actually supplied to the Applicant following the date of
this Order.
8. THIS COURT ORDERS that the Applicant shall remit, in accordance with legal
requirements, or pay:
(a) any statutory deemed trust amounts in favour of the Crown in right of Canada or of
any Province thereof or any other taxation authority which are required to be
deducted from employees' wages, including, without limitation, amounts in respect of
(i) employment insurance, (ii) Canada Pension Plan, (iii) Quebec Pension Plan, and
(iv) income taxes;
(b) all goods and services or other applicable sales taxes (collectively, "Sales Taxes")
required to be remitted by the Applicant in connection with the sale of goods and
services by the Applicant, but only where such Sales Taxes are accrued or collected
after the date of this Order, or where such Sales Taxes were accrued or collected prior
to the date of this Order but not required to be remitted until on or after the date of
this Order, and
(c) any amount payable to the Crown in right of Canada or of any Province thereof or
any political subdivision thereof or any other taxation authority in respect of
municipal realty, municipal business or other taxes, assessments or levies of any
nature or kind which are entitled at law to be paid in priority to claims of secured
creditors and which are attributable to or in respect of the carrying on of the Business
by the Applicant.
all of the foregoing to permit the Applicant to proceed with an orderly restructuring of the
Business (the "Restructuring").
- 5 -
9. THIS COURT ORDERS that until a real property lease is disclaimed or resiliated in
accordance with the CCAA, the Applicant shall pay all amounts constituting rent or payable as
rent under real property leases (including, for greater certainty, common area maintenance
charges, utilities and realty taxes and any other amounts payable to the landlord under the lease)
or as otherwise may be negotiated between the Applicant and the landlord from time to time
("Rent"), for the period commencing from and including the date of this Order, twice-monthly in
equal payments on the first and fifteenth day of each month, in advance (but not in arrears). On
the date of the first of such payments, any Rent relating to the period commencing from and
including the date of this Order shall also be paid.
10. THIS COURT ORDERS that, except as specifically permitted herein, the Applicant is
hereby directed, until further Order of this Court: (a) to make no payments of principal, interest
thereon or otherwise on account of amounts owing by the Applicant to any of its creditors as of
this date; (b) to grant no security interests, trust, liens, charges or encumbrances upon or in
respect of any of its Property; and (c) to not grant credit or incur liabilities except in the ordinary
course of the Business.
RESTRUCTURING
11. THIS COURT ORDERS that the Applicant shall, subject to such requirements as are
imposed by the CCAA and such covenants as may be contained in the Definitive Documents (as
hereinafter defined), have the right to:
(a) permanently or temporarily cease, downsize or shut down any of its business or
operations and to dispose of redundant or non-material assets not exceeding $100,000
in any one transaction or $500,000 in the aggregate;
(b) terminate the employment of such of its employees or temporarily lay off such of its
employees as it deems appropriate; and
(c) pursue all avenues of refinancing of its Business or Property, in whole or part, subject
to prior approval of this Court being obtained before any material refinancing;
- 6 -
12. THIS COURT ORDERS that the Applicant shall provide each of the relevant landlords
with notice of the Applicant's intention to remove any fixtures from any leased premises at least
seven (7) days prior to the date of the intended removal. The relevant landlord shall be entitled
to have a representative present in the leased premises to observe such removal and, if the
landlord disputes the Applicant's entitlement to remove any such fixture under the provisions of
the lease, such fixture shall remain on the premises and shall be dealt with as agreed between any
applicable secured creditors, such landlord and the Applicant, or by further Order of this Court
upon application by the Applicant on at least two (2) days' notice to such landlord and any such
secured creditors. If the Applicant disclaims or resiliates the lease governing such leased
premises in accordance with Section 32 of the CCAA, it shall not be required to pay Rent under
such lease pending resolution of any such dispute (other than Rent payable for the notice period
provided for in Section 32(5) of the CCAA), and the disclaimer or resiliation of the lease shall be
without prejudice to the Applicant's claim to the fixtures in dispute.
13. THIS COURT ORDERS that if a notice of disclaimer or resiliation is delivered pursuant
to Section 32 of the CCAA, then (a) during the notice period prior to the effective time of the
disclaimer or resiliation, the landlord may show the affected leased premises to prospective
tenants during normal business hours, on giving the Applicant and the Monitor 24 hours' prior
written notice, and (b) at the effective time of the disclaimer or resiliation, the relevant landlord
shall be entitled to take possession of any such leased premises without waiver of or prejudice to
any claims or rights such landlord may have against the Applicant in respect of such lease or
leased premises, provided that nothing herein shall relieve such landlord of its obligation to
mitigate any damages claimed in connection therewith.
NO PROCEEDINGS AGAINST THE APPLICANT OR '1'1W PROPERTY
14. THIS COURT ORDERS that until and including Friday, June 26, 2015, or such later date
as this Court may order (the "Stay Period"), no proceeding or enforcement process in any court
or tribunal (each, a "Proceeding") shall be commenced or continued against or in respect of the
Applicant or the Monitor, or affecting the Business or the Property, except with the written
consent of the Applicant and the Monitor, or with leave of this Court, and any and all
Proceedings currently under way against or in respect of the Applicant or affecting the Business
or the Property are hereby stayed and suspended pending further Order of this Court.
ti
- 7 -
NO EXERCISE OF RIGHTS OR REMEDIES
15. THIS COURT ORDERS that during the Stay Period, all rights and remedies of any
individual, firm, corporation, governmental body or agency, or any other entities (all of the
foregoing, collectively being "Persons" and each being a "Person") against or in respect of the
Applicant or the Monitor, or affecting the Business or the Property, are hereby stayed and
suspended except with the written consent of the Applicant and the Monitor, or leave of this
Court, provided that nothing in this Order shall (i) empower the Applicant to carry on any
business which the Applicant is not lawfully entitled to carry on, (ii) affect such investigations,
actions, suits or proceedings by a regulatory body as are permitted by Section 11.1 of the CCAA,
(iii) prevent the filing of any registration to preserve or perfect a security interest, or (iv) prevent
the registration of a claim for lien.
NO INTERFERENCE WITH RIGHTS
16. THIS COURT ORDERS that during the Stay Period, no Person shall discontinue, fail to
honour, alter, interfere with, repudiate, terminate or cease to perform any right, renewal right,
contract, agreement, licence or permit in favour of or held by the Applicant, except with the
written consent of the Applicant and the Monitor, or leave of this Court.
CONTINUATION OF SERVICES
17. THIS COURT ORDERS that during the Stay Period, all Persons having oral or written
agreements with the Applicant or statutory or regulatory mandates for the supply of goods and/or
services, including without limitation all computer software, communication and other data
services, centralized banking services, payroll services, insurance, transportation services, utility
or other services to the Business or the Applicant, are hereby restrained until further Order of this
Court from discontinuing, altering, interfering with or terminating the supply of such goods or
services as may be required by the Applicant, and that the Applicant shall be entitled to the
continued use of its current premises, telephone numbers, facsimile numbers, intemet addresses
and domain names, provided in each case that the normal prices or charges for all such goods or
services received after the date of this Order are paid by the Applicant in accordance with normal
payment practices of the Applicant or such other practices as may be agreed upon by the supplier
- 8 -
or service provider and each of the Applicant and the Monitor, or as may be ordered by this
Court.
18. THIS COURT ORDERS that during the Stay Period, Chase Paymentech Solutions, Bank
of Nova Scotia and JPMorgan Chase Bank (collectively the "Processing Parties") are hereby
restrained until further Order of this Court from discontinuing, altering, interfering with or
terminating the supply of goods or services as may be required by the Applicant under the
Merchant Agreement between Red Label and the Processing Parties, based on the insolvency of
the Company, provided in each case that the normal prices or charges for all such goods or
services received after the date of this Order are paid by in accordance with normal payment
practices or such other practices as may be agreed upon by the Processing Parties and each of the
Applicant, Red Label and the Monitor, or as may be ordered by this Court.
NON-DEROGATION OF RIGHTS
19. THIS COURT ORDERS that, notwithstanding anything else in this Order, no Person
shall be prohibited from requiring immediate payment for goods, services, use of lease or
licensed property or other valuable consideration provided on or after the date of this Order, nor
shall any Person be under any obligation on or after the date of this Order to advance or re-
advance any monies or otherwise extend any credit to the Applicant. Nothing in this Order shall
derogate from the rights conferred and obligations imposed by the CCAA.
PROCEEDINGS AGAINST DIRECTORS AND OFFICERS
20. THIS COURT ORDERS that during the Stay Period, and except as permitted by
subsection 11.03(2) of the CCAA, no Proceeding may be commenced or continued against any
of the former, current or future directors or officers of the Applicant with respect to any claim
against the directors or officers that arose before the date hereof and that relates to any
obligations of the Applicant whereby the directors or officers are alleged under any law to be
liable in their capacity as directors or officers for the payment or performance of such
obligations, until a compromise or arrangement in respect of the Applicant, if one is filed, is
sanctioned by this Court or is refused by the creditors of the Applicant or this Court.
- 9 -
DIRECTORS' AND OFFICERS' INDEMNIFICATION AND CHARGE
21. THIS COURT ORDERS that the Applicant shall indemnify its directors and officers
against obligations and liabilities that they may incur as directors or officers of the Applicant
after the commencement of the within proceedings, except to the extent that, with respect to any
officer or director, the obligation or liability was incurred as a result of the director's or officer's
gross negligence or wilful misconduct.
22. THIS COURT ORDERS that the directors and officers of the Applicant shall be entitled
to the benefit of and are hereby granted a charge (the "Directors' Charge") on the Property,
which charge shall not exceed an aggregate amount of $4 3 million, as security for the indemnity
provided in paragraph 21 of this Order. The Directors' Charge shall have the priority set out in
paragraphs 39 and 41 herein.
23. THIS COURT ORDERS that, notwithstanding any language in any applicable insurance
policy to the contrary, (a) no insurer shall be entitled to be subrogated to or claim the benefit of
the Directors' Charge, and (b) the Applicant's directors and officers shall only be entitled to the
benefit of the Directors' Charge to the extent that they do not have coverage under any directors'
and officers' insurance policy, or to the extent that such coverage is insufficient to pay amounts
indemnified in accordance with paragraph 21 of this Order.
APPOINTMENT OF MONITOR
24. THIS COURT ORDERS that KPMG Inc. is hereby appointed pursuant to the CCAA as
the Monitor, an officer of this Court, to monitor the business and financial affairs of the
Applicant with the powers and obligations set out in the CCAA or set forth herein and that the
Applicant and its shareholders, officers, directors, and Assistants shall advise the Monitor of all
material steps taken by the Applicant pursuant to this Order, and shall co-operate fully with the
Monitor in the exercise of its powers and discharge of its obligations and provide the Monitor
with the assistance that is necessary to enable the Monitor to adequately carry out the Monitor's
functions.
25. THIS COURT ORDERS that the Monitor, in addition to its prescribed rights and
obligations under the CCAA, is hereby directed and empowered to:
(h)
- 1 0 -
(a) monitor the Applicant's receipts and disbursements;
(b) report to this Court at such times and intervals as the Monitor may deem appropriate
with respect to matters relating to the Property, the Business, and such other matters
as may be relevant to the proceedings herein;
(c) assist the Applicant, to the extent required by the Applicant, in its dissemination, to
Red Label (being a lender to the Applicant pursuant to the Commitment Agreement,
as hereinafter defined), the Bank of Montreal and their respective counsel on a basis
to be agreed upon with each of Red Label and the Bank of Montreal of financial and
other information as agreed to between the Applicant and each of Red Label and the
Bank of Montreal which may be used in these proceedings including reporting on a
basis to be agreed with each of Red Label and the Bank of Montreal;
(d) advise the Applicant in its preparation of the Applicant's cash flow statements and
reporting required by Red Label and the Bank of Montreal, which information shall
be reviewed with the Monitor and delivered to Red Label, the Bank of Montreal and
their respective counsel on a periodic basis agreed to by each of Red Label and the
Bank of Montreal;
advise the Applicant in its development of the Plan and any amendments to the Plan;
assist the Applicant, to the extent required by the Applicant, with the holding and
administering of creditors' or shareholders' meetings for voting on the Plan;
have full and complete access to the Property, including the premises, books, records,
data, including data in electronic form, and other financial documents of the
Applicant, to the extent that is necessary to adequately assess the Applicant's
business and financial affairs or to perform its duties arising under this Order;
be at liberty to engage independent legal counsel or such other persons as the Monitor
deems necessary or advisable respecting the exercise of its powers and performance
of its obligations under this Order; and
(0 perform such other duties as are required by this Order or by this Court from time to
time.
26. THIS COURT ORDERS that the Monitor shall not take possession of the Property and
shall take no part whatsoever in the management or supervision of the management of the
Business and shall not, by fulfilling its obligations hereunder, be deemed to have taken or
maintained possession or control of the Business or Property, or any part thereof.
27. THIS COURT ORDERS that nothing herein contained shall require the Monitor to
occupy or to take control, care, charge, possession or management (separately and/or
collectively, "Possession") of any of the Property that might be environmentally contaminated,
might be a pollutant or a contaminant, or might cause or contribute to a spill, discharge, release
or deposit of a substance contrary to any federal, provincial or other law respecting the
protection, conservation, enhancement, remediation or rehabilitation of the environment or
relating to the disposal of waste or other con amination including, without limitation, the
Canadian Environmental Protection Act, the Ontario Environmental Protection Act, the Ontario
Water Resources Act, or the Ontario Occupational Health and Safety Act and regulations
thereunder (the "Environmental Legislation"), provided however that nothing herein shall
exempt the Monitor from any duty to report or make disclosure imposed by applicable
Environmental Legislation. The Monitor shall not, as a result of this Order or anything done in
pursuance of the Monitor's duties and powers under this Order, be deemed to be in Possession of
any of the Property within the meaning of any Environmental Legislation, unless it is actually in
possession.
28. THIS COURT ORDERS that that the Monitor shall provide any creditor of the Applicant
and Red Label with information provided by the Applicant in response to reasonable requests for
information made in writing by such creditor addressed to the Monitor. The Monitor shall not
have any responsibility or liability with respect to the information disseminated by it pursuant to
this paragraph. In the case of information that the Monitor has been advised by the Applicant is
confidential, the Monitor shall not provide such information to creditors unless otherwise
directed by this Court or on such terms as the Monitor and the Applicant may agree.
29. THIS COURT ORDERS that, in addition to the rights and protections afforded the
Monitor under the CCAA or as an officer of this Court, the Monitor shall incur no liability or
-12-
obligation as a result of its appointment or the carrying out of the provisions of this Order, save
and except for any gross negligence or wilful misconduct on its part. Nothing in this Order shall
derogate from the protections afforded the Monitor by the CCAA or any applicable legislation.
30. THIS COURT ORDERS that the Monitor, counsel to the Monitor and counsel to the
Applicant shall be paid their reasonable fees and disbursements, in each case at their standard
rates and charges, by the Applicant as part of the costs of these proceedings. The Applicant is
hereby authorized and directed to pay the accounts of the Monitor, counsel for the Monitor and
counsel for the Applicant on a weekly basis and, in addition, the Applicant is hereby authorized
to pay to the Monitor, counsel to the Monitor, and counsel to the Applicant, retainers in the
amounts of $25,000, $25,000 and $50,000, respectively, to be held by them as security for
payment of their respective fees and disbursements outstanding from time to time.
31. THIS COURT ORDERS that the Monitor and its legal counsel shall pass their accounts
from time to time, and for this purpose the accounts of the Monitor and its legal counsel are
hereby referred to a judge of the Commercial List of the Ontario Superior Court of Justice.
32. THIS COURT ORDERS that the Monitor, counsel to the Monitor, if any, and the
Applicant's counsel shall be entitled to the benefit of and are hereby granted a charge (the
"Administration Charge") on the Property, which charge shall not exceed an aggregate amount
of $1 million, as security for their professional fees and disbursements incurred at the standard
rates and charges of the Monitor and such counsel, both before and after the making of this Order
in respect of these proceedings. The Administration Charge shall have the priority set out in
paragraphs 39 and 41 hereof.
INTERCOMPANY FINANCING
33. THIS COURT ORDERS that the Applicant is hereby authorized and empowered to
obtain and borrow under a credit facility from Red Label in order to finance the Applicant's
working capital requirements and other general corporate purposes and capital expenditures,
provided that borrowings under such credit facility shall not exceed $4 million unless permitted
by further Order of this Court.
- 13 -
34. THIS COURT ORDERS THAT such credit facility shall be on the terms and subject to
the conditions set forth in the Commitment Agreement between the Applicant and Red Label
dated as of May 26, 2015 (the "Commitment Agreement") filed.
35. THIS COURT ORDERS that the Applicant is hereby authorized and empowered to
execute and deliver such credit agreements, mortgages, charges, hypothecs and security
documents, guarantees and other definitive documents (collectively, the "Defmitive
Documents"), as are contemplated by the Commitment Agreement or as may be reasonably
required by Red Label pursuant to the terms thereof, and the Applicant is hereby authorized and
directed to pay and perform all of its indebtedness, fees, liabilities and obligations to Red Label
under and pursuant to the Commitment Agreement and the Definitive Documents as and when
the same become due and are to be performed, notwithstanding any other provision of this Order.
36. THIS COURT ORDERS that Red Label shall be entitled to the benefit of and is hereby
granted a charge (the "Intercompany Charge") on the Property, which Intercompany Charge
shall not secure an obligation that exists before this Order is made. The Intercompany Charge
shall have the priority set out in paragraphs 39 and 41 hereof.
37. THIS COURT ORDERS that, notwithstanding any other provision of this Order:
(a) Red Label may take such steps from time to time as it may deem necessary or
appropriate to file, register, record or perfect the Intercompany Charge or any of the
Definitive Documents;
(b) Red Label, upon 3 calendar days' notice to the Applicant and the Monitor, may
exercise any and all of its rights and remedies against the Applicant or the Property
under or pursuant to the Commitment Agreement, Definitive Documents and the
Intercompany Charge, including without limitation, to cease making advances to the
Applicant and set off and/or consolidate any amounts owing by Red Label to the
Applicant against the obligations of the Applicant to Red Label under the
Commitment Agreement, the Definitive Documents or the Intercompany Charge, to
make demand, accelerate payment and give other notices, or to apply to this Court for
the appointment of a receiver, receiver and manager or interim receiver, or for a
-14-
bankruptcy order against the Applicant and for the appointment of a trustee in
bankruptcy of the Applicant; and
(c)
the foregoing rights and remedies of Red Label shall be enforceable against any
trustee in bankruptcy, interim receiver, receiver or receiver and manager of the
Applicant or the Property.
38. THIS COURT ORDERS AND DECLARES that Red Label shall be treated as unaffected
in any plan of arrangement or compromise filed by the Applicant under the CCAA, or any
proposal filed by the Applicant under the Bankruptcy and Insolvency Act of Canada (the "BIA"),
with respect to any advances made under the Definitive Documents.
VALIDITY AND PRIORITY OF CHARGES CREATED BY THIS ORDER
39. THIS COURT ORDERS that the priorities of the Administration Charge, the Directors'
Charge and the Intercompany Charge, as among them, shall be as follows:
First — Administration Charge (to the maximum amount of $1 million);
Second — Directors' Charge (to the maximum amount of $4.3 million); and
Third — Intercompany Charge (to the maximum amount of $4 million).
40. THIS COURT ORDERS that the filing, registration or perfection of the Directors'
Charge, the Administration Charge or the Intercompany Charge (collectively, the "Charges")
shall not be required, and that the Charges shall be valid and enforceable for all purposes,
including as against any right, title or interest filed, registered, recorded or perfected subsequent
to the Charges coming into existence, notwithstanding any such failure to file, register, record or
perfect.
41. THIS COURT ORDERS that each of the Directors' Charge, the Administration Charge
and the Intercompany Charge (all as constituted and defined herein) shall constitute a charge on
the Property and such Charges shall rank in priority to all other security interests, trusts, liens,
charges and encumbrances, claims of secured creditors, statutory or otherwise (collectively,
"Encumbrances") in favour of any Person other than any validly perfected security interest
-15-
granted in favour of the Bank of Montreal and Element Fleet Management Inc. and set out in
Schedule "A" hereto.
42. THIS COURT ORDERS that except as otherwise expressly provided for herein, or as
may be approved by this Court, the Applicant shall not grant any Encumbrances over any
Property that rank in priority to, or pan passu with, any of the Directors' Charge, the
Administration Charge or the Intercompany Charge, unless the Applicant also obtains the prior
written consent of the Monitor, Red Label and the beneficiaries of the Directors' Charge and the
Administration Charge, or further Order of this Court.
43. THIS COURT ORDERS that the Directors' Charge, the Administration Charge, the
Commitment Agreement, the Definitive Documents and the Intercompany Charge shall not be
rendered invalid or unenforceable and the rights and remedies of the chargees entitled to the
benefit of the Charges (collectively, the "Chargees") and/or Red Label thereunder shall not
otherwise be limited or impaired in any way by (a) the pendency of these proceedings and the
declarations of insolvency made herein; (b) any application(s) for bankruptcy order(s) issued
pursuant to the BIA, or any bankruptcy order made pursuant to such applications; (c) the filing of
any assignments for the general benefit of creditors made pursuant to the BIA; (d) the provisions
of any federal or provincial statutes; or (e) any negative covenants, prohibitions or other similar
provisions with respect to borrowings, incurring debt or the creation of Encumbrances, contained
in any existing loan documents, lease, sublease, offer to lease or other agreement (collectively,
an "Agreement") which binds the Applicant, and notwithstanding any provision to the contrary
in any Agreement:
(a) neither the creation of the Charges nor the execution, delivery, perfection, registration
or performance of the Commitment Agreement or the Definitive Documents shall
create or be deemed to constitute a breach by the Applicant of any. Agreement to
which it is a party;
(b) none of the Chargees shall have any liability to any Person whatsoever as a result of
any breach of any Agreement caused by or resulting from the Applicant entering into
the Commitment Agreement, the creation of the Charges, or the execution, delivery
or performance of the Definitive Documents; and
-16-
(c)
the payments made by the Applicant pursuant to this Order, the Commitment
Agreement or the Definitive Documents, and the granting of the Charges, do not and
will not constitute preferences, fraudulent conveyances, transfers at undervalue,
oppressive conduct, or other challengeable or voidable transactions under any
applicable law.
44. THIS COURT ORDERS that any Charge created by this Order over leases of real
property in Canada shall only be a Charge in the Applicant's interest in such real property leases.
SERVICE AND NOTICE
45. THIS COURT ORDERS that the Monitor shall (i) without delay, publish in the Globe
and Mail a notice containing the information prescribed under the CCAA, (ii) within five days
after the date of this Order, (A) make this Order publicly available in the manner prescribed
under the CCAA, (B) send, in the prescribed manner, a notice to every known creditor who has a
claim against the Applicant of more than $1000, and (C) prepare a list showing the names and
addresses of those creditors and the estimated amounts of those claims, and make it publicly
available in the prescribed manner, all in accordance with Section 23(1)(a) of the CCAA and the
regulations made thereunder.
46. THIS COURT ORDERS that the E-Service Protocol of the Commercial List (the
"Protocol") is approved and adopted by reference herein and, in this proceeding, the service of
documents made in accordance with the Protocol (which can be found on the Commercial List
website at http://www.ontariocourts.ca/scj/practice/practice-directions/toronto/e-service-
protocol/) shall be valid and effective service. Subject to Rule 17.05 this Order shall constitute
an order for substituted service pursuant to Rule 16.04 of the Rules of Civil Procedure. Subject to
Rule 3.01(d) of the Rules of Civil Procedure and paragraph 21 of the Protocol, service of
documents in accordance with the Protocol will be effective on transmission. This Court further
orders that a Case Website shall be established in accordance with the Protocol with the
following URL: http://www.kpmg.com/Ca/en/services/Advisory/TransactionRestructuring/
CreditorlinkSites/TravelBrands/Pages/default.aspx.
47. THIS COURT ORDERS that if the service or distribution of documents in accordance
with the Protocol is not practicable, the Applicant and the Monitor are at liberty to serve or
-17- el •
•
distribute this Order, any other materials and orders in these proceedings, any notices or other
correspondence, by forwarding true copies thereof by prepaid ordinary mail, courier, personal
delivery or facsimile transmission to the Applicant's creditors or other interested parties at their
respective addresses as last shown on the records of the Applicant and that any such service or
distribution by courier, personal delivery or facsimile transmission shall be deemed to be
received on the next business day following the date of forwarding thereof, or if sent by ordinary
mail, on the third business day after mailing.
GENERAL
48. THIS COURT ORDERS that the Applicant or the Monitor may from time to time apply
to this Court for advice and directions in the discharge of its powers and duties hereunder.
49. THIS COURT ORDERS that nothing in this Order shall prevent the Monitor from acting
as an interim receiver, a receiver, a receiver and manager, or a trustee in bankruptcy of the
Applicant, the Business or the Property.
50. THIS COURT HEREBY REQUESTS the aid and recognition of any court, tribunal,
regulatory or administrative body having jurisdiction in Canada or in the United States, to give
effect to this Order and to assist the Applicant, the Monitor and their respective agents in
carrying out the terms of this Order. All courts, tribunals, regulatory and administrative bodies
are hereby respectfully requested to make such orders and to provide such assistance to the
Applicant and to the Monitor, as an officer of this Court, as may be necessary or desirable to give
effect to this Order, to grant representative status to the Monitor in any foreign proceeding, or to
assist the Applicant and the Monitor and their respective agents in carrying out the terms of this
Order.
51. THIS COURT ORDERS that each of the Applicant and the Monitor be at liberty and is
hereby authorized and empowered to apply to any court, tribunal, regulatory or administrative
body, wherever located, for the recognition of this Order and for assistance in carrying out the
terms of this Order, and that the Monitor is authorized and empowered to act as a representative
in respect of the within proceedings for the purpose of having these proceedings recognized in a
jurisdiction outside Canada.
-18-
52. THIS COURT ORDERS that any interested party (including the Applicant and the
Monitor) may apply to this Court to vary or amend this Order on not less than seven (7) days'
notice to any other party or parties likely to be affected by the order sought or upon such other
notice, if any, as this Court may order.
53. THIS COURT ORDERS that this Order and all of its provisions are effective as of
12:01 a.m. Eastern Standard/Daylight Time on the date of this Order.
ENTERED AT / INSCRIT A TORONTO
ON I BOOK NO: LE I DANS LE REG1STRE NO.:
MaY 17 1015
Element Fleet Management Inc.
649304379 — 20081016195015317545 (10 years)
Bank of Montreal
666306711 — 20101202131315322720 (5 years)
Bank of Montreal
686407545 — 20130426145215909482 (7 years)
Bank of Montreal
893190F (registered December 2, 2010; 5 years)
-19-
SCHEDULE "A"
N/A Ontario
Ontario
Ontario
British Columbia
Equipment, Motor Vehicle; General Collateral Description: Any vehicles specified and any other vehicles of whatever year, make or model including after acquired vehicles and including any trailers and/or equipment, and including proceeds thereof, provided to the debtor pursuant to a motor vehicle lease agreement made between the parties. No other assets included.
Inventory, Equipment, Accounts, Other, Motor Vehicle
All present and after acquired personal property of the debtor and, without limitation, all fixtures, crops, and licences
N/A
Inventory, Equipment, Accounts, Other, Motor Vehicle
N/A
N/A
- 20 -
Bank of Montreal
317103H (registered April 29, 2013; 7 years)
All present and after acquired personal property
N/A British Columbia
Bank of 13-0336151-0002 All movable N/A Quebec Montreal (registered April 29,
2013; 10 years)
Nature of registration: Movable hypothec without delivery
property, present and future, corporeal and incorporeal, of every nature and kind and wheresoever located.
Element 08-0601273-0001 The universality of N/A Quebec Fleet Management Inc. (lessor)
(registered October 20, 2008; expiring July 26, 2018)
all vehicles, present and future, provided to the lessee pursuant to
Nature of registration: Global registration pertaining to rights resulting from a lease (master agreement)
the motor vehicle lease agreement between the lessor and the lessee, including all replacements, supplements or amendments thereto, together with any replacement or supplementary vehicle provided to the lessee in accordance with the terms of the said motor vehicle lease agreement, and including all accessories and equipment attached thereto from time to time.
•
4
IN THE MATTER OF COMPANIES' CREDITORS ARRANGEMENT ACT, R.S.C. 1985, c. C-36, AS AMENDED
AND IN THE MATTER OF A PLAN OF COMPROMISE OR ARRANGEMENT OF TRAVELBRANDS INC.
- /D l ec2u applicant Court File No.
ONTARIO SUPERIOR COURT OF JUSTICE
(COMMERCIAL LIST)
PROCEEDING COMMENCED AT TORONTO
OSLER, HOSKIN & HARCOURT LLP Barristers & Solicitors P. 0. Box 50 1 First Canadian Place Toronto ON M5X 1B8
John A. MacDonald (LSUC#25884R) Tel: 416.862.5672
Marc Wasserman (LSUC#44066M) Tel: 416.862-4908
Michael DeLellis (LSUC# 4803 8U) Tel: 416.862.5997 Fax: 416.862.6666
Lawyers for the Applicant Matter No. 1163346
KPMG Inc. Bay Adelaide Centre Telephone (416) 777-8500 333 Bay Street Suite 4600 Fax (416) 777-3364 Toronto ON M5H 2S5 Internet www. kpmg.ca Canada
Court File: CV-15-10980-00CL June 1, 2015
NOTICE TO CREDITORS
Re: TravelBrands Inc. ("TravelBrands" or the "Company")
On May 27, 2015, TravelBrands was granted an order (the "Initial Order") by the Ontario Superior Court of Justice (Commercial List) (the "Court") under the Companies' Creditors Arrangement Act, R.S.C. 1985, c. C-36, as amended (the "CCAA").
KPMG Inc. has been appointed as monitor in the Company's CCAA proceedings (the "Monitor") pursuant to the Initial Order of the Court dated May 27, 2015.
The Initial Order provides for, among other things, a stay of proceedings until June 26, 2015 (the "Stay Period"). The Stay Period may be extended by the Court from time to time. The Company is continuing to operate in the ordinary course pursuant to provisions of the Initial Order.
A copy of the Initial Order as well as the other materials filed in the CCAA proceedings may be obtained at http://www.kpmg.com/ca/travelbrands.
Pursuant to the Initial Order, all persons having oral or written agreements with the Company or statutory or regulatory mandates for the supply of goods and/or services, are hereby restrained until further Order of this Court from discontinuing, altering, interfering with or terminating the supply of such goods or services as may be required by the Company, provided that the normal prices or charges for all such goods or services received after the date of this Initial Order are paid by the Company in accordance with normal payment practices of the Company or such other practices as may be agreed upon by the supplier or service provider and each of the Company and the Monitor, or as may be ordered by this Court.
The Initial Order prohibits the Company from making payments relating to the supply of goods or services prior to May 27, 2015, other than payments to certain parties specified in the Initial Order and in accordance with the Initial Order.
During the Stay Period, all parties are prohibited from commencing or continuing legal or enforcement actions against the Company and all rights and remedies of any party against or in respect of the Company or their assets are stayed and suspended except with the written consent of the Company and the Monitor, or leave of the Court.
To date, no claims procedure has been approved by the Court and creditors are therefore not required to file a proof of claims at this time.
KPMG Inc. is a subsidiary of KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International") a Swiss entity.
KPMG
Page 2
If you have any questions regarding the foregoing or require further information, please consult the Monitor's website ( http://www.kpmg.com/ca/travelbrands) or should you wish to speak to a representative of the Monitor, please contact Marcel Rethore by telephone at 416-777-3775 or by email at [email protected] .
Yours very truly,
KPMG Inc. In its capacity as the Court-appointed Monitor of TravelBrands Inc.
Per: Philip J. Reynolds Senior Vice President
Europe. Economic Affairs Commissioner Marc Moscovici co ld on French radio Tuesday
het ''the diseussic. were fruit-ful, they are bearing fruit. there coal understanding by both the is Creek government and its credi
The nitro., suggested that Greem might be offered some don s relief in evehange for pen•
Intl and a higher retirement age. Again. no ddads were released, but Mr. Mowoviii work that, ,Ce. are starting to work in depth on pensions. The Creek
government has made some first prerooss and the pr. and cons fie heing considcredr Other than pension reform and
rctirement ages, one of the key sticking points i3 the sive of Greece's primary surplus - the budget surplus remaining after debt tiayments are stripped out.
Greece's creditors have insisted on a hefty primary surplus target of .33 per cent. Syriga wants Ng_tre oft bout per Lent, which
on it to devote more money social services. A figure somewhere in the middle is like
The emergency meeting in Der /in brought together German Chancellor Angela Merkel. mango President thancifis dot-Linde, EC:13 President Marin
Magid, European Commission Preside. lean.Claudc {wicker
and (M.P. Lig... managing die. of the OM
If Greece audits trio of ordi. tors re..hh a compromise this month, Coe. will be handed €2.2.billion in loans left over from its previous bailout.
COURT FILE NO. CV.15-10981.00CL
IN THE ONTARIO SUPERIOR COURT OF JUSTICE (COMMERCIAL LIST)
IN THE MATTER OF THE COMPANIES' CREDITORS ARRANGEMENT ACT, R.S.C. 1985, C. C-36, AS AMENDED
AND IN THE MATTER OF THE PLAN OF COMPROMISE OR ARRANGEMENT OF
TRAVELBRANDS INC.
Take notice that on may 27, 2015 TravelBrands inc. rhavalerander or the
owlaanY- 1 commented court...Sed reS.C.ing proCeedings under Ihe Cangenies' Ch.., a iangememl Act (FCCAA-1,
KM. Inc. has been appointed by the Ontario Suoenor Court 11 losece lCcrinnarcial h.) nhe "'Court") as Monitor (Me -Monitor.) in he Compan y 's
[theproceedings pursuant to Me Order of Me Court dated Ma y 27, 2015
[the -Initial Order).
Not.. hereby given Mat a copy of the Initial Order and he Companys appircatron {.1N on the Monitor's website at!
httpllvearm.kping.comdadravelerends
The Muuilar unit puil additional rele.111 .al. an related to these proceedings on the
Mat webs. as they bem
available. Interested persons ma y contact Me Monitor directl y for turf information.
moo: In.c.
AM: Marcel Rethorf 333 Bay Street. Suite .00 Toronto, ON. M5H 255
Telephone: {4111127 3775 Email: mrsehormakping.ca
ECONOMICAL MUTUAL INSURANCE COMPANY
NOTICE OF ANNUAL MEETING OF MEMBERS
Not. is hereby g iven that the 143rd Annual Meetin g of Members of Ltonomical Mutual h... Compan y will . held at 10:30 am.
astern Tie/ on Juna 24, 2015. at Bin ge.. Ballroom. ,325 Migdnans Centro Delve. Kitchener. M.o. forme follo.ng purposes:
1. to receive the consolidated Mendel statements of the company for the year end. Oncamber 2014, himItni web gm auditors ivpurt Mew, awhile actuary 's report on the thereat;
2. to appoint the external mid.,
3. to elect...,
lo approve, ratify and confirm adv. n of the can •s BY-bm No. A.5, relating Me nomination oldkectors for elect., (advance notice by law's: and
3 to transact such other business as may properly be brought Oe.ro Me
insseting and any alournments of Pommies thereof.
BY ORDER OF THE BOARD,. 01PECTORS.
L 2;1;7A'"'
• • • economical'
nom/mice
MEETING NOTICES
TENDERS
THUNDER SAY
HYIDRO Thunder Bay Hydro Nechicity Distribution Inc. (TBNEW) invites
interested proponents to respond to This Request For P/0,001:
FOP #P15.36 Supervisory Control And Data Acquisition (SCADA) Core Preateplacement Services
Reguesf Fl, Prop°. documents will be avaitable at the TISHEDI Purchasing Dept., located in the Thunder Bay Hydro Operations Crane. 37 Front Street, MOM MOOT commend. wednesday. Ann 3, afas from MO am. to 11{30 am. and 1:30 pny to 3,30 pm. Eastern Daylight Tim
Submissions will be received at the above-noted location MN, no Wm Man Ow pm, hasten, Dayaoht Tome U.S.,, July 6, gm.
Dead perchmlnpethhydre....
GLOBE UNLIMITED Tow dbactxra Ad.' Pa. tgaal.Fes4114
Start small. There's an ad space that's right for your business.
al clink do
Globe2Go - The Globe and Mail Metro (Ontario Edition) - 3 Jun 2015 - Page #24 Page 1 of 1
RS • REPORT ON BUSINESS
1111 GLOBE AND MAIL • WEDNESDAY. TUNE 3. 201
INTERNATIONAL EURO ZONE
Greece told not to expect flexibility ERIC REGULY EMBNPLAN BMW, L BHP ROME
Economics
The Creek bailout aide was headed fur its grand finale as both the Greek government and
international creditor, Mfifted proposals designed to keep Mc cas-stiapped country officially solvent and within the cum cone.
Details of the competing pro.
posalc ,sere not known by Thes. day evening. European time, thou gh some Flamm.leader, why hopeful that the two sides,
at war with each another since the election in January of the Creme's antidusterity Syria par-ty, could hammer not a confirm.
mice agreement before Grdfce
got swamped by a new wave of debbpayment deadlines.
But Dutch Finance Minister Idoen Dijnelbloo, who leads
the group of euro gone linanCe ministers, sold Greece should rem emcd of flexibility from the European Onion. the Euro non Central Bank and the Inter-
national Monetary Fund the duce institutions Mat have somsored Greece's bailouts.
It long as it doesn't meta eco-mimic conditions. we can't come to an agreement. - he told Ger. many's 1105 Television. des not right to Mink that we can mom half nbeervers
agreed that the creditors wawa only go so far to meet Greeds ant austerity &maids.
Greece has a sorry record of meeting its austerity commit-
, mem from the two bailouts
snuck since lord, when the mind's borrowing coats rose to
pnN, longs, shutting it out of the bb, debt markets. Thole are
Our that Cr.. will avec to compromise, receive fresh bail- out Mans then simply refuse to
Ott
implement new reform me.1
sures.
Nesdaym day after Fom an leaders held an emergency feting in Berlin to draft a final
rocfie nropoml, the gmernment
of Greek Prime Minister Alexis Thpras said n had submitted its own propoml.
! 'After submitting a complete
pcoposal for a deal last night to instiutions, we arc 04 waiting In them to submit their own plan hick to us,. Mr. Tdpras told mfmners. "Greece is the one that
submits the plan Greece has Put forward prommals..e have made amicmsions, which is nat-mat in a negotiation. but our
Definition i The latest portmanteau in economic l 'sold pm! is to have a broad
circles, expanding on the now-ubiquitous 'Groxit: , agreement by Friday, when a Greek exit from the euro vone. Among market ML"' make a €3.' -mil
lion (5.4millicm) I players, Graccident refers to Athens missing a the IMF.
Many mandrels have ken payment to Me International Monetary' Fund. launched and rejected by firth
In plain English, it means ... cops. sides since Syriza party swept into power. The latest proposals could also go nowhere, though a
Mediums to Greece do not later Greece will return to nor- , sums of imminent debt-payment oniemsmns. at lea3t big matey, but I inn not sure it will deadlines has put the Creek
ones sad t;L: Progopoulos. happen this week be even government under enormous dab. did political analyst at the compromise is readmit, iris ' pressure to agree. tn new bailout think tank Canoe international de the implementation phase which f program within the next me, or formation europeetm,Suriner or will matter." - Mo.
Greek Prime Minister Alexis Depts. leads a meeting at the Education Ministry on Need., in Athens. Haws. suweNsfASSIXINCOnas
WHAT'S THE WORD
Graccident
BUSINESS CLASSIFIED PLACE AN AO CALL. 14300.560.0521
EMAIL: fiMfERTOMMOGLOBEAMP,Mit COm
LEGALS
CBA Financial Services Corporation -
Annual Financial Statements
Members of CBA Financial Services Corporation are hereb y advised that the Report of the Corporations public
she and the Financial Shtements of Corporation for the year
.led Novernbw 30. 2014 are now available at the Corporation% registered office at 5 Park Horne Avenue, Suite 500, Toronto ON FON 1.4. Members may. on re quest, obtain copies of these dwurnenh lee of charge at Me address above or by prepaid mail. The documents are also available on the Corporatio,s website at www.barfinancial.com ,
Corporation des services financiers
ABC - Etats financiers annuels
ies membres de la Corporation des services financiers ABC son. dorm. aux presentee We le uPPOrt de l'expe.mlable de a Comoralion et les W
oats
p financiers
de la orporal. Pour feawricR terming le 30 novembre 2014 ant .1.1`nano dismiddes au siege
do la Chgwrahln nark Home Avenue. boreal/
Tvoearlmnon
iettneot ON
e nM ..,
500 membres
oblenirL
u ope su deman d, aPade.
mdsesus
ou par abider pool payt. document sord acspubles
sur WN Web de la Corporation www,barfiraw.com .
The Canadian Bar Insurance Association
— Annual Financial Statements
Members of the Canadian Bar Insurance Asso.bon are .4. advised 1 hat the Report of Me Associations public accountant and the Financial Statements of Me Association for the year ended November 30. 2014 are now available at the Association, reg... office at 5 Park Home /Wetly, Suite .0. Toronto ON
WigPUN CAA. Members m y, on
.. obtain to of thew documents free of c. ge at Me address above w b y prepaid mad. The documents are also available on t. Wsociationh webs. al arwarbannsurance.corn.
L'Association d'assurances du
Barreau canadien - Etats financiers annuels
c manatdes de L'Association .wassurances du narreau van..
vofit inform. aux present. die 'e rapport
up l'expen-comptable de
L'Associagon et i. eats financiers derhssxia.npor l'execoce fermi. le 30 noyernbre 2014 ant main fit disponible, au siege social do "assnciatinn sis an 5 PAM Home Avenue. bureau 500, irmonfoom Pew cm. 3. em.es Pc.e. en obtenir une copie
sur demande Padre,. tidessus ou par worrier post pa ge . 4, documents sant au.... sur le site
d/de Lfassociation
wwwassurancetorreou.com .
WestJet Airlines Ltd.
Dividend Notice
rlttallatt llaaalta ttaaat that. oltectaat
May a. all:. Om Barad ta Direatara
at ',suet kalines td declared a
ottartarly ataadent1 of all la
Cana... per Carrtraan
Share ard pet-Variable akttmet
,attar, payatatt Ikate al. 20, to
atalrehMars pf record at the alaae
ttl Itasoneas iqn," 17, 2015
By Order of me Heard W areflOrS.
Barbara munroe
Sen., Voce ltraattent. Gene,
anFiEsicm-s-NI
BUSINESS TO BUSINESS
ARCRAFT we Low ...CON Re,
1 pay. 4000 range. infined.$3.3.030. larmeSpears31.333o3sohmiaspears.corn
IWO Astra SW, 3355 AFTT, Engines yont on NSF 0.1, John doPhinsofi 0 Associates at 30341 ,0037 or wiew.hoplonsonessorielescorn
CAPITAL WANTEDJAVALABLE
ATTENTION BuluTERS. Pr.. funds
ent ' v'a=d:LiVtlir
PRIVATE LENDER for constiudion; developaled, rehrmnr,
?0,17-330.1,1,1
PROJECT FiNANCINs avtii..1 Estate, Cas. ,Ingot tle, n energy . WM.
http://globe2go.newspaperdirect.com/epaper/services/OnlinePrintHandler.ashx?issue=18.. . 6/3/2015
500
TOO
0
Avdage down payment and
Pt. NM DT Dun( type Average down payment
• Average pace
COO in thousands otdoBars
ElvA
SUBSEQUENT NITER Other NU%
77,,d.. I-Lon 9.3*
oayment rules could hare a major economic impact, the as-RA-lotion's chief economist Will Manning wrote.
The report is Isssed on a surrey conducted in Apill and May of
COURT FILE NO. CV.15.10981-00CL
IN THE ONTARIO SUPERIOR COURT OF JUSTICE (COMMERCIAL LIST)
IN THE MATTER OF THE COMPANIES' CREDITORS ARRANGEMENT ACT, R.S.C. IS85, 1. C.36, AS AMENDED
AND IN THE MATTER OF THE PLAN OF COMPROMISE OR ARRANGEMENT OF
TRAVELBRANDS INC.
Take notes Mal on May 27, 2015 Trvvellnench ix. reravelnyande or the -Company') commenced ...supervised resinrtturing proceedings under the Companies' creditors asemementAet MCA,/
ormon1. has been appointed by the Ontario Superior Court or Justice (Commercial Lig)(the "Cofer) as Monitor (the 1.nitorThn the Company's
' CAA proceedings pursuant to Me order of Me Court dated May 17,1015 ghe genial Order").
=ronn`g.b4rZ7,Z■gggol,.T.Ict=,!'"Ce"''"'( ' hnp)//www.kpmg.comka/Trovelarands
related monitor will post additional relevant information and doeurnentatMn
related to these proceedings on the Monitor's website as they become available. Interested persons may contact the Monifor directly for further informatkm aT
ICIM14 Inn Attention Marcel RNnora 333 Bay Street, Suite 9600 Toronto, ON, 11514 255
Telephone. (916)1M 3725 Email: rrverhoressassnneo
Take notice that an application has been commenced as court file number 0513•529082 in the Ontario Sunnier Court of Justice by lames McGill, Applicant, against Stephen Prokney and Joseph Rowel, Respondents, to remove a certificate of pending litigation against a properly known as 121 Elmer Avenue Toronto Ontario, The Respondents are fo contact Murray Maki, Barrister and Solicitor, at 1200 Eq.,. Areenue11S1, Suite 203, Taranto Ontario M3C IH9.
GLOBE UNLIMITED Your all-accessdlgita1 pass
tgam.ea/signup
=11111M11■1 Bank of Montreal
DIVIDEND NOTICE
N OTICE W hereby given Mat dividends .1 the outstanding slat. of Bank of Montreal hove been declared payable
for the current mincer to Shareholders of record at the close of Nice.. on August 3, 2015. es follows:
Nveme an «am Aug.. 2.... Common Shares: Dividend No. 627 of S082 per share
Payable on or after August 25, 2015 Non-Munuceive Prefxred shares(
Series 14, Dividend No. 31 of $0,328125 per Share Series 15. Chvidend No. 29 0130.2825 per share Series 10, Dividend No. 28 of $0211825 per share Series 17, Dividend No. 08 of $0.144742 per share Seders 25. Dividend No, 11,110,24375 Per share Swing 27, Dividend Mrs Bb «ISO 25 per shore Stade 29, Divalued No. 04 u15020375 po anon Series 31, Dividend No. 04 of $0.2375 per share
Inn of ca., holders of shares may choose to ideal or receive tab dividends in common snares of She Bank in axon:lance wN the Shareholder Dividend Reinvestment and Sham Purchase Men. For further information pease contact Computecehate Trust Company of Canada at 1 300•340•5021.
Er Order of the Board Barbera M. Muir
Senior Vico Preussen, OCMY Corm.. MMus and Corporate Seeress,
Toronto, June 10, 2015
ECONOMICAL MUTUAL INSURANCE COMPANY
NOTICE OF ANNUAL MEETING OF MEMBERS
Bohm is hereby given that the 141d Annual Meeting of Members of Foonomonal Mutual Insurance Company will he held at 1030 a.m. (Cavern TM. on June 24, 2015. at Bingernene Ballroom, 425 dingernans Centre Drive, Hashener. Ontario. for the Idlowing purposes.
1. to recerve the console.. Mandel statements or the comp,. the year ended December 31, 2014, tooether with thn auditor's report thereon. and the ad.,. report .Me poky liabilities there.
2. le appoint Me erten. Milers.
3 to And !Vectors, 4 to approve.t4y an confirm the e.ptien of t. conyany'a BYtme
re)atIng to Me nomination re directors for election tadvarne notice hy-Lawf and
, to heated aurt,0 other busineas as MOI Wont* Trt bton21 ,2 bebt' the meet. and any adjournments ommessonements.reer.
BY ORDEROF THE BOARDOF DIRECTORS. • • •
nee Dey economical*
In .2.8.0. 0.10
sod o Wow' Cow. e Svcral, May 27, 2015
INSURANCE
Start small. There's an ad space that's right for your business.
giceefi
/adspace
Headline. Logo. Action. Learn about advertising in The Globe and Mail.
globel ca/adsua re
Globe2Go - The Globe and Mail Metro (Ontario Edition) - 10 Jun 2015 - Page #24 Page 1 of 1
B6 • REPORT ON BUSINESS THE GLOBE AND MAIL • WRONESORY. IONE Ill. 2011
HOUSING
REAL ESTATE
Many Canadians relying on Ranch sets
loans to fund down payments rs tornegrrtYe cord for Alberta
NOR
Legacy Oil sale to Crescent Point opposed by FrontFour
Wahl MeMAHON EM. BUIE RETORTER
DOWN PAYMENTS
.anadiani are borrowing more ban Simbillion a year nom Lan y,tentlers and their eredh cards ) dinar/ a (10.1 payment for a
hem, win, such borrowing mounting tor MIA 0 tn Is per ern of total down pay While the largest tinnsse for own pewterts came nom per•
Anal raving, borrowed money theform of Mans, gifss and
xedit card withdraw , ls - repro. rented more than a quarter of the
MS-billion that first time [Mine rumrs paid Inward their down payments ricer the past two corv, a survey by Canadian Assm (anon of Acerssiited Mortgage rofmsionals Renal. Nearly. Cr cent of fustaime bug. eceieed some two of M. SiR
or their Mmily. for those Inners who 0110 ill
sfighlY11.0-tollion in RISC sar-an. eve, year for down NY' mem, per cent said they had also borrowed to top up their re fitment savin.accounts Despite rising house prices and
crek.honom interest rates, Como dians hare tended to pay relative-)) large down payments on their ornes. Pirstaime buyers paid an serape of Ofiono. or el percent crward their home purchase. But the survey results Mow
that along with borrow.' money for down payments. Canadian loam buyers fineness on average. 111 or cent of the coo of their )urchases through Mr. -Mager nd hem:, equitylines of coedit,
tiring to Rs per con for first-time uyers.
moo
SOO
200
Itf1;"17)7" 12"7" 717g
INE GLOBE AND MAIL 'SOURCE UMW
More than a quarter of first , tune buyers also said they wouldn't he able to afford to buy a home if the federal government doubled the minimum down peement 41 tO per Cent Chan ) Mat first-time buyers represent about .r.v. Kr cent of the Canadian housing nwrket. Mug. , down -
Breakdown et source of down- • CALGAR
' , • a . , : A sprawling cattle ranch south of
Calgary has set a record for the
I wt expensive residential prop
5L6% i
rver Tided on Alberta's 7•11.S system, aemoding Stahel,.
i Canada In, Sotheby's lus listed the n0.-
1 hervare Ilardi Ghost Pine Ransil for a hefty gm; (U.S.O ur
Gin l Canadian. 11.6% ,h. Pcople that are looking to buy
is type of ranch are people that Om trot really greeted by what's
Personal I happening here with Ow come • raid Renato Reid, the So.,
estate agent selling the
The proert sits near the of Claresho
plm,
y about an hou
townr and
half drive smith of ()Arany and an hour north of the U.S. hordes
The liar-hl Ghost ranch liar lino cattle and eO Angus .A51)0111 and all the herr...Mond sheds needed for a working finish. The property includes 26fo hectares of deeded land end 2.3oo hectares
There is also a socosq,wre- hxn lamb home, a guest 11,0,10
(out village homesf ra full
he tame of buyer is a fiord-: ehain operator that is looking to swirls.ad their lief Stippr
' Ma Reid said. • "Or it can he someone tea t is
international. but loolung for a high-end hunting ground for mule deer and elk," added Mr,
about Boo Canadians who Nought Reid. homer between got) and the first • quarter of this year, ; the Canadian Press
CAROLYN KIN
Stakeholder Ersontrour CrOrnal " Croup 1,1.0 raid Tuesday it .sold yore against Legacy Oil
Gas Inc.'s plan In he acTtired by Crescent Point Edgy Cce, thing the proposed deal's inns nrre and Crescent Point's cur. rent trading price.
Crescent Point said en May oh that it mar. ton Legart, .1 light-oil-weighted producer fix Mai on Southeast Salt:Melt, wan XIII SOUITIOCSt Alberta, fin
fibilfibillion in shares and debt. At the tin., Dom, saki the deal valued iN shares at Se.85 toward
our Cle1COnt
priCe 'in
tile eye of the deal of 33o.
Legcy's shares dined Tumday Et 0ss on the Toronto Stock Exchange, while Crescent (Mint dosed at $sssm
"In light of the structure of the nanwo.tir arrd eurront boding price of Crescent Point shares, wc omnot support the plan of arrangtment as pro-postal." Frontrour portfolio manager Zachary George Sold In a t:Dement Rep...moth. for
:unmet umnerlialely marlahle to comment. lts shareholders Will 1010 on th. loan with
sur 1% ■ :111 on lull.
Legacy (LEG) Close) Sass',. Op el Crescent Point (CPC) phst, 10013, rip OTC
Average resale prices
• Toronto and Vancouver • Bast of Canada
SOON thous.d+ of dollars
700
Pamnenh by bnYer
IRSTINE OMR Other -6A
LEGALS
The Canadian Bar Insurance Association
- Annual Financial Statements
Members of The Canadian Bar insurance .sodation are hereby advised that the Run., Of the Association's public accountant and the Financial Statements of the Asscenton for the year ended November 30, 2014 are now available at the Association's registered onice al 5 Park Home Avenue, Suite SOO, Toronto ON NUN 14. Members my. on reques obtain copies ot these documents free of charge at he address above or by mepaid
TortrItCr!""aron':t4.?n www.harinsurance.corn.
L'Association d'assurances du
Barreau canadien - Etats financiers annuels tes membce ce C.rocarron
n rls'a user' Pre sswleS"'; le rapport de e..censorable de
de L'Associaflon l'Assocatitan et ' less Nat, financiers
;re' 343171:t mood maintertam disponi., au siege soma de c :Asso.ion sir au 5 Park Hone Avenue, WO, TorontoOn MINC1.4.1.esmembres ended . ob.. <m° graben, der der.nde I
ne l'arbet
aiss
rvdmun eu our murder post PM. LEK documents sort a. publih no www
k. site Webble,,LAscso%rofion
CBA Financial Services Corporation -
Annual Financial Statements
Members of CBA financial Services CorPOrMlon are M2oby advised that the Report cd the Corporation's public accountant and the Financial Statements
hie year en ed il'o'rrerfitr"Z 259 are nnded
ncer available at the Corporation's registered office at 5 Park Nome Avenue, Suite 910, Toronto ON N2N 61.4. Members may, on rtrtecrtt, obtain copies of these
documents free of charge at the addrds above or by prepaid man Thenocurneins are ace available on the Corporation, website at www.bartinancialoom.
Corporation des services financiers
ABC - bats financiers annuels
Les membres de la Corporation dm services dancers ABC sent inform. as preseMes goe be iontrort de l'expemcomptati d la Corporation et les Mots financiers de N Corporationpour Texercise rt.. le 10 noverobe 254 soot
main, man, disporvb. . so.I de N Corporation . au Pari• Home Avenue. bore. 500, ToronteON MTN a4. Les membres Peuvent en obtenir tine copie
abate demote a rack.. par courier Imp PaV9
me.sent aussi putt. sire web de ta Corporation a
wvetcbarfironctal.com .
BUSINESS TO BUSINESS
AIRCRAFT
12 Challenger.. Ir.( Timei r Rut:
ArNe ,vearA16,203.0600jaapeamcom
MOO
51 ass ISSS ART, Engines en on 51Se Odd, Call kid cepkinson 6 Associates at 40.919027 wanchookinsenassodececom
ROSINESS OPPORTUNMES
!1,77.1,1VM. ,S,a1 NO198% CAP 916A999300
CAPITAL %YAWED/AVAILABLE
PRIVATE LENDER to construction, dmekpcet, refirode, acquiticen. Wage SI
RE • 550M. Fart decisions
209364.0409 re [email protected]
http://globe2go.newspaperdirect.com/epaper/services/OnlinePrintHandler.ashx?issue=1.. . 6/12/2015
KPMG Inc. Bay Adelaide Centre 333 Bay Street Suite 4600 Toronto ON M5H 2S5 Canada
Telephone (416) 777-8500 Fax (416) 777-3364 Internet www.kpmg.ca
Via Email
Manulife Financial Corporation 2 Queen Street East Toronto, Ontario M5C 3G7
Attention: Mr. Anthony Lin Senior Counsel, Institutional Advisory
June 4, 2015
Dear Sirs:
Re: TravelBrands Inc.
On Wednesday May 27, 2015, TravelBrands Inc. ("TravelBrands") filed an application to the Ontario Superior Court of Justice (Commercial List) pursuant to the Companies' Creditors Arrangement Act. On that date, the Honourable Mr. Justice Newbould issued an Initial Order granting the application. Pursuant to the Initial Order, the court appointed KPMG Inc. as Monitor of Travel Brands. As Monitor, KPMG has full and complete access to TravelBrands' premises, books and records and management. The Monitor is obligated to, among other things:
1. Monitor the company's cash-flow, including all receipts and disbursements;
2. Monitor the creation and preservation of the customer trust funds; and
3. Report to the court immediately if there is a material adverse change in the company's projected cash-flow or financial circumstances.
TravelBrands remains in possession and control of all of its assets and is continuing to operate in the ordinary course. The Monitor notes the following:
• There has been no cessation of business, nor is this contemplated and TravelBrands is continuing to operate its business as usual pursuant to the terms of the Initial Order and under the supervision of the Monitor.
• In certain provinces, there are regulations requiring TravelBrands to place all funds (including deposits and prepayments) received from customers for travel services
KPMG Page 2 of 2
not yet rendered into trust accounts for the benefit of such customers in the event that the travel service is not delivered or the customer cancels the travel service.
• TravelBrands places all customer prepayments and deposits in trust accounts even in provinces where there is no regulatory obligation to do so. As of May 29, 2015, TravelBrands held $15.374 million of customer deposits and prepayments in trust for such purposes.
• The trust funds are only released from trust once the customer has received the travel service.
• The company maintains 27 trust accounts in order to comply with these obligations and has authority to maintain such accounts during the CCAA proceedings.
TravelBrands and the Monitor have met with representatives from TICO and are working with TICO to provide TICO with continuing and timely financial reporting, including with respect to trust funds.
As stated above, the Monitor is required under the CCAA to report to the court any material adverse change in the company's financial circumstances. The Monitor would provide Manulife with notice of any such material adverse change. The Monitor is of the view that no such material adverse change has occurred since the date of the Initial Order.
Business continues as usual without interruption under the supervision of the court appointed Monitor. Customer trust funds are only released from trust once the customer has received the travel service regardless of whether the customer booked the travel before or after TravelBrands' CCAA proceedings.
Please contact the undersigned should you have any additional questions on this matter.
Yours very truly,
KPMG Inc. In its capacity as the Court-appointed Monitor of TravelBrands Inc.
Per: Philip J. Reynolds Senior Vice President
Unaudited - Prepared by Management TravelBrands Inc.
Variance analysis for the four week period ending June 12, 2015 Presented in thousands of Canadian dollars (000's)
Week ending
Total Forecast
12-Jun-15
Total Actuals
12-Jun-15
Variance Actual v. Forecast
Dollars
Variance Actual v. Forecast
Percentages
CASH IN TRUST
Cash receipts Inflows from customer deposits for travel services 37,325 32,932 (4,393) -12%
Cash disbursements Outlflows to travel suppliers (20,502) (17,012) 3,490 17% Outflows to other vendors (2,000) (3,992) (1,992) -100%
Total cash in trust disbursements (22,502) (21,004) 1,498 7%
Net trust cash flow 14,823 11,928 (2,895) -20%
Opening balance of cash in trust 15,514 15,514 - Net trust cash flow 14,823 11,928 (2,895) -20% Outflows to operating cash (15,291) (7,505) 7,786 -51%
Ending balance of cash in trust 15,047 19,938 4,891 33%
OPERATING CASH
Cash receipts Inflows from accounts receivable and customer rebates 3,071 4,434 1,363 44% Inflows from cash in trust 15,291 7,505 (7,786) -51% Inflows from rental sublease 70 - (70) -100%
Total operating cash receipts 18,432 11,939 (6,493) -35%
Cash disbursements Outlflows to travel suppliers (12,827) (6,459) 6,368 50% Outlflows for rent and utilities (379) (308) 71 19% Outflows for payroll and benefits (2,941) (2,750) 191 7% Outflows for capital expenditures (200) - 200 100% Outflows for professional fees (750) (246) 504 67% Outflows for selling, general and adminstrative expenses (3,714) (1,662) 2,052 55%
Total operating cash disbursements (20,811) (11,426) 9,385 45%
Net operating cash flow (2,379) 513 2,892 122%
Opening balance of operating cash 4,619 4,619 - Net operating cash flow (2,379) 513 2,892 122% Red Label funding (Commitment Agreement) -
Closing balance of operating cash 2,240 5,132 2,892 129%
FORECAST
Unaudited - Prepared by Management
TeavelBranda Inc. Updated cash flow forecast for the period June 13 to September II, 2015 Presented in thousands of Canadian dollars (000's)
Week number Week ending
Forecast
1 19-Jun-15
Forecast
2 26-Jun-15
Forecast
3 03-Jul-15
Forecast 4
10-Ju1-15
Forecast
5 17-Ju1-15
Forecast
6 24-Jul-15
Forecast
7 31-Jul-15
Forecast
8 07-Aug-15
Forecast 9
14-Aug-1.5
Forecast
10 21-Aug-I5
Forecast
11 28-Aug-15
Forecast
12 04-Sep-I5
Forecast
13 11-Sep-15
Forecast Total
13 weeks
CASH IN TRUST
Cash receipts Inflows from customer deposits for travel services 6,219 6,258 6,372 8,930 8,854 8,888 8,916 10,612 10,501 10,365 10,528 10,554 10,554 117,752
Cash disbursements Outlflows to travel suppliers (4,360) (4,652) (5,837) (4,896) (5,420) (7,023) (6,868) (5,586) (6,456) (6,290) (6,569) (7,202) (6,362) (77,722) Outflows to other vendors (325) (325) (850) (500) 1500) (500) 1500) (500) (500) (500) (500) (394) (558) (6,452)
Total cash Its trust disbursements (4,885) (4,977) (6,687) (5796) (5,920) (7,523) (7,368) 16,086) (6,956) (6,790) (7,069) (7,596) (6,919) (84,174)
Net trust cash flow 1,335 1,281 (315) 3.534 2,934 1.365 1,548 4,526 3.545 3,775 1,459 2.958 3.634 33,578
Opening balance of cosh in trust 19,938 17.907 16.283 11,825 13.325 14,302 13,675 13.203 13,716 13.359 13.167 12.698 13.183 19,938 Net trust cash flow 1,335 1,281 (315) 3,534 2,934 1,365 1,548 4,526 3,545 3,775 3,459 2,958 3,634 33,578 Outflows to operating cash (3.365) (2,904) (4.146) (2,033) (1,957) (1,9911 (2.020) (4,013) (3,902) (3,966) (3,928) (2.473) (2.073) (38,771)
Ending balance of cash in bust 17,907 16,285 11,825 13,325 14.302 13,675 13,203 13,716 13,359 13.167 12,698 13,183 14,745 14,745
OPERATING CASH
Cash receipts Inflows from accounts receivable and customer rebates 507 1,245 457 457 457 488 1,157 410 410 410 1,140 410 410 7,960 Inflows from cash In trust 3765 2,904 4.146 2.033 1.957 1,991 2,020 4,013 3.902 3,966 3,928 2,473 2.073 38,771 Inflows from rental sublease
Total operating sash receipts 3.872 4,149 4.603 2,401 2.415 2,479 3,177 4,423 4,3)2 4,376 5,068 2.883 2,483 46,731
Cash disbursements ()Willows to travel suppliers (2,244) 13,531) (4,893) (2.370) 11,750) (820) (1.046) (175) (974) 11,865) (1,263) (1,843) (858) (23,633)
°Willows for rent and utilities (169) (183) (169) (183) (169) (183) (1,057) Outflows for payroll and benefits 11,375) (1,376) (1,165) - (1,376) - 11365) - (1,376) - (8,233)
Outflows for capital expenditures (25) (28) (25) (25) (251 (25) (25) (25) (25) (26) (25) (25) (25) (328) Outflows for professional fees (170) (301) (100) (250) (100) (200) (125) 1125) (26) (50) (251 (35) (31) (1.538) Outflows for selling, general and adminstrative expenses (494) (231) (145) (470) (1,344) (453) (1,140) (351) (1,505) (517) (1,286) (551) (289) (8,775)
Total operating cash disbursements (3,102) (5,463) (3,346) (4,491) (3,388) (2,863) (2,337) (2,235) (2,530) (3.992) (2.600) (4,014) (1,203) (43,364)
Net operating cash flow 770 11,316) (743) (2,000) 1973) (384) 841 2,188 1.783 385 2,468 (1,131) 1.280 3,167
Opening balance of operating cash 5,132 5,902 4,586 3,843 1,843 870 4,486 5,326 7,514 9,297 9,681 12,150 11,019 5,132 Net operating cash flow 770 (1.316) (743) (2,000) (973) (384) 841 2,188 1,783 385 2,468 (1,131) 1.280 3,167 Red Label funding (Commitment Agreement) 4,000 4,000
Closing balance of operating rash 5,902 4,586 3,843 1,843 870 4,486 5,326 7,514 9,297 9,681 12,150 11,019 12,299 12,299
To be read in conjunction with the attached Summary of Notes and Assumptions
TravelBrands Inc. Updated Cash Flow Forecast Summary of Notes and Assumptions
1. The Updated Cash Flow Forecast has been prepared by the Company based on unaudited information solely for the purpose of projecting the cash receipts and disbursements of TravelBrands during the CCAA Proceedings. The Updated Cash Flow Forecast is presented on a weekly basis for the period June 13, 2015 to September 11, 2015 (the "Cash Flow Period").
2. The Updated Cash Flow Forecast has been prepared primarily based on historical trends and Senior Management's current forecast expectations with updates based on experience since the beginning of the CCAA Proceedings. The actual timing and amount of receipts and disbursements may vary from forecast and the variances may be material.
3. The Updated Cash Flow Forecast is presented in thousands of Canadian dollars.
4. The Updated Cash Flow Forecast is shown in two sections: (a) receipts and disbursements relating to cash held in-trust; and (b) receipts and disbursements relating to operating cash.
5. TravelBrands opening cash position as at June 13, 2015 was approximately $19.9 million of cash held in-trust and $5.1 million of operating cash.
6. Cash held in-trust relates to deposits from customers that have paid for travel services that have not yet been rendered by the Company.
7. The Company may use the cash held in-trust to pay certain trade suppliers that require payment in advance of travel. Trust cash cannot be used to settle supplier obligations related to travel services for customers that have already travelled or for payment of other non-trade obligations. The disbursements from cash-in-trust have been forecast by category and include payment for airfare, hotels, cruises, car rentals, tour packages and attraction ticket bookings.
8. The Company's obligation to hold customer deposits in trust ceases after the customer has traveled, at which point, TravelBrands moves the cash from its trust accounts to its general accounts. The cash can then be used to pay the Company's outstanding obligations.
9. Accounts receivable collections relate to customers that have previously travelled and have been assumed to be collected in accordance with the Company's existing terms.
These receipts also include rebates related to commissions, overrides, segment fees, and other miscellaneous revenue earned by the Company.
10. The rent collected from sublets relate to the Company's sublease agreements for the property at 75 Eglinton. These collections have been removed from the Updated Cash Flow Forecast as the 75 Eglinton lease has been disclaimed.
11. The payments to suppliers from operating cash have been forecast by category and include payment for airfare, hotels, cruises, car rentals, tour packages and attraction ticket bookings related to travel services that have already been provided.
12. Since the date of the Initial Order, the Company has been in negotiations with Sears regarding a potential business arrangement during which time Sears has agreed to waive daily amounts accruing due under the Amended Sears Agreement. As such no royalty fees have been included in the updated forecast.
13. The Updated Cash Flow Forecast assumes that rent is paid semi-monthly, on the 1s t and 15 th of the month, during the CCAA Proceedings. These costs relate to the Company's head office and regional offices. Rent also includes occupancy costs, utilities and realty taxes. Rent does not include payments made for the 75 Eglinton property as this lease has been disclaimed.
14. Other non-trade disbursements include payments for telephone supporting the Company's offices and call center, computer servers and maintenance and capital expenditures.
15. Professional fees include payments to the Company's legal counsel, the Monitor and the Monitor's legal counsel.
16. The funding from Red Label is provided pursuant to the Commitment Agreement which provides financial support to TravelBrands during the CCAA Proceedings. Funding will be provided if and when it is needed determined by the Company and Red Label in consultation with the Monitor.
17. The Updated Cash Flow Forecast does not reflect the issuance of any new letters of credit or increases to any existing letters of credit.
IN THE MATTER OF THE COMPANIES' CREDITORS ARRANGEMENT ACT, R.S.C. 1985, c. C-36, AS AMENDED AND IN THE MATTER OF A PLAN OF COMPROMISE OR ARRANGEMENT TRAVELBRANDS INC.
Court File No. CV-15-10980-00CL
ONTARIO
SUPERIOR COURT OF JUSTICE (COMMERCIAL LIST)
Proceeding commenced at Toronto
FIRST REPORT OF THE MONITOR KPMG INC.
STIKEMAN ELLIOTT LLP Barristers & Solicitors 5300 Commerce Court West 199 Bay Street Toronto, Canada M5L 1B9
Ashley John Taylor LSUC#: 39932E Tel: (416) 869-5236 Email: [email protected] Patrick Corney LSUC#: 65462N Tel: (416) 869-5668 Email: [email protected] Fax: (416) 861-0445 Lawyers for the Monitor
Appendix B
Appendix C
STIKEMAN ELLIOTT
Stikeman Elliott LLP Barristers & Solicitors
5300 Commerce Court West, 199 Bay Street, Toronto, Canada M5L 1B9 Tel: (416) 869-5500 Fax: (416) 947-0866 www.stikeman.com
Direct: (416) 869-5236 E-mail: [email protected]
VIA EMAIL ([email protected]) July 3, 2015 File No.: 0142841030
Mr. Asim Iqbal Thornton Grout Finnigan LLP Toronto-Dominion Centre 100 Wellington Street West Toronto, ON M5K 1K7
Dear Asim:
Re: TravelBrands CCAA Proceeding
We are in receipt of your letter dated June 29, 2015. Responses to the three questions posed therein follow using the numbering from your letter.
1. Stikeman Elliott LLP ("Stikeman") conducted a security review of the security granted by Thomas Cook Canada Inc. ("TCC") (now TravelBrands Inc. ("TravelBrands")) to secure the amounts owing to Thomas Cook Financial Services Inc. (now 2224855 Ontario Inc.) ("Holdco"). Stikeman has rendered an opinion to the Monitor with respect to the validity and perfection thereof under the laws of Ontario and British Columbia and a second opinion with respect to the validity and opposability thereof under the laws of Quebec. The opinions conclude that, subject to the usual assumptions and qualifications contained therein, as of May 27, 2015:
(a) The general security agreement dated as of May 1, 2013 made by TCC in favour of Holdco (the "Security Agreement") would be valid and enforceable against the bankrupt estate of TravelBrands under the laws of the Provinces of Ontario and British Columbia;
(b) The Security Agreement created a valid security interest pursuant to the laws of Ontario and British Columbia in favour of Holdco in the personal property described in the Security Agreement as being secured thereby in which TravelBrands had rights at such date, to secure payment and performance of the obligations described in the Security Agreement as being secured by it;
TORONTO
MONTREAL
OTTAWA
CALGARY
VANCOUVER
NEW YORK
LONDON
SYDNEY
6427524 v2
2
STIKEMAN ELLIOTT
(c) Registration has been made in all public offices provided for under the laws of the Provinces of Ontario and British Columbia where such registration is necessary to perfect the security interests created by the Security Agreement with respect to the personal property of TravelBrands;
(d) The movable hypothec agreement dated as of May 26, 2015 made by TravelBrands in favour of Holdco (the "Hypothec Agreement") would be valid and enforceable against the bankrupt estate of TravelBrands under the laws of the Provinces of Quebec;
(e) The Hypothec Agreement created a valid hypothec pursuant to the laws of the Province of Quebec in the aggregate principal amount of $78,000,000 with interest thereon at the rate of 25% per annum in favour of Holdco in the movable property described in the Hypothec Agreement as being secured thereby in which TravelBrands had rights at such date and which consists of corporeal movable property of TravelBrands (other than corporeal moveable property of TravelBrands not ordinarily used in more than one jurisdiction) and incorporeal movable property of TravelBrands established by a title in bearer form, the whole situate in the Province of Quebec, and financial assets of TravelBrands held in a securities account or securities to the extent that the internal laws of the Province of Quebec would apply to such matters, to secure payment and performance of the obligations described in the Hypothec Agreement as being secured by it; and
(f) The Hypothec Agreement has been registered in all places in the Province of Quebec as are currently necessary to render the hypothecs created pursuant thereto opposable to third parties.
The Monitor has reviewed the searches conducted against the Personal Property Security Registers in Ontario and British Columbia and the Register of Personal and Movable Real Rights in Quebec and subject to statutory and possessory liens, security interests perfected by possession or control, purchase money security interests, rights of certain motor vehicle and equipment lessors and claims that have priority by operation of law, it appears that Holdco has a security interest with respect to inventory, equipment, accounts and motor vehicles that ranks second after a security interest granted in favour of Bank of Montreal.
The conclusions of the opinions will be reported to the Court in the Monitor's next report. We will provide a copy of the security opinions to any interested party requesting a copy who confirms in advance that: (a) such party is not our client and therefore is not entitled to rely upon the opinion and that Stikeman Elliott LLP has no liability or responsibility to such party with respect to any loss, liability, damage or expense in connection with the provision to such party of the opinion or such party's review of contents
6427524 v2
3
STIKEMAN ELLIOTT
thereof; (b) such party will not disclose the opinion to any other party; and (c) the provision of the opinion does not constitute a waiver of privilege.
2. With respect to the advances comprising the Red Label Claim (as defined in your draft order), the Monitor has been provided with and has reviewed the following documents:
(a) Credit Facility Agreement between TCC, as borrower, and Thomas Cook Group Treasury Limited ("Treasury"), as lender, dated April 20, 2012, providing for one or more loans up to a total amount of $60,000,000, or such other amount as agreed by the lender from time to time;
(b) Supplemental Agreement between TCC, as borrower, and Treasury, as lender, dated November 28, 2012, increasing the amount available under the Credit Facility Agreement to $75,000,000;
(c) A spreadsheet prepared by TravelBrands summarizing the dates and quantum of advances made by Treasury to TCC. The Monitor understands that the spreadsheet was generated from the books and records of TCC. According to the spreadsheet, Treasury made the following advances to TCC:
(i) $5,000,000 in September 2011;
(ii) $15,000,000 in January 2012;
(iii) $5,000,000 in February 2012;
(iv) $6,000,000 in March 2012;
(v) $15,000,000 in April 2012;
(vi) $4,000,000 in June 2012;
(vii) $8,500,000 in September 2012;
(viii) $7,000,000 in November 2012; and
(d) Audited Consolidated Financial Statements of TCC as at October 1, 2010, September 30, 2011 and September 30, 2012 (the "Financial Statements").
The Monitor has reviewed the Financial Statements and notes that they are consistent with the history of advances provided by TravelBrands based on the books and records of TCC. The Financial Statements reflect total advances to TCC from Treasury of $5,001,000 (including interest) as at September 30, 2011, and $58,536,000 (including interest) as at September 30, 2012. According to the information derived by TCC's books and records, an
6427524 v2
If you have any questions do not hesitate to contact the und TS1 irectly.
Regards
Ashley Ta
cc: Philip Reynolds and Anamika Gadia, KPMG Marc Wasserman and Michael De Lellis, Osler Hoskin and Harcourt LLP
4
STIKEMAN ELLIOTT
additional $7,000,000 was advanced in November 2012 bringing the total advances to approximately $65.5 million. The Monitor further notes that the Financial Statements were audited by PricewaterhouseCoopers LLC, a reputable accounting firm. Based on its review of the documents listed above, the Monitor sees no need for further investigation.
3. In addition to the security opinions described under 1. above, the Monitor is preparing a report to be filed with the Court describing the Monitor's review of the grant of security by TCC to Holdco in May 2013, which security covers the pre-existing unsecured debt of $65.5 million. In particular, the Monitor considered whether the grant of security constituted a preference or a transfer at undervalue, as those terms are used in the Bankruptcy and Insolvency Act. Following its review, the Monitor concluded that the grant of security in May 2013 does not constitute a preference or transfer at undervalue.
6427524 v2
Appendix D
Unaudited - Prepared by Management
TravelBrands Inc. Actual receipts and disbursements For the eight week period ending August 7, 2015Presented in thousands of Canadian dollars (000's) Total Total Variance Variance
Actuals Forecast Actual v. Forecast Actual v. Forecast7-Aug-15 7-Aug-15 Dollars Percentages
CASH IN TRUST
Cash receiptsInflows from customer deposits for travel services 58,692 65,050 (6,358) -10%
Cash disbursementsOutlflows to travel suppliers (31,484) (44,843) 13,359 30%Outflows to other vendors (12,017) (4,000) (8,017) -200%
Total cash in trust disbursements (43,501) (48,843) 5,342 11%-
Net trust cash flow 15,191 16,207 (1,016) -6%
Opening balance of cash in trust 19,938 19,938 - Net trust cash flow 15,191 16,207 (1,016) -6%Outflows to operating cash (18,407) (22,429) 4,021 -18%
Ending balance of cash in trust 16,721 13,716 3,005 22%
OPERATING CASH
Cash receiptsInflows from accounts receivable and customer rebates 3,661 5,180 (1,519) -29%Inflows from cash in trust 18,407 22,429 (4,021) -18%Inflows from rental sublease - - -
Total operating cash receipts 22,068 27,608 (5,540) -20%
Cash disbursementsOutlflows to travel suppliers (6,766) (16,829) 10,064 60%Outlflows for rent and utilities (959) (705) (255) -36%Outflows for payroll and benefits (5,358) (5,492) 134 Outflows for capital expenditures - (203) 203 100%Outflows for professional fees (1,009) (1,371) 361 26%Outflows for selling, general and adminstrative expenses (5,027) (4,627) (400) -9%
Total operating cash disbursements (19,120) (29,226) 10,107 35%
Net operating cash flow 2,949 (1,618) 4,567 282%
Opening balance of operating cash 5,132 5,132 - Net operating cash flow 2,948 (1,618) 4,566 282%Red Label funding (Commitment Agreement) - 4,000 (4,000)
Closing balance of operating cash 8,080 7,514 566 8%
Appendix E
FORECAST Unaudited - Prepared by Management
TravelBrands Inc. Weekly csah flow forecastFor the period August 8 to November 6, 2015Presented in thousands of Canadian dollars (000's) Forecast Forecast Forecast Forecast Forecast Forecast Forecast Forecast Forecast Forecast Forecast Forecast Forecast ForecastWeek number 1 2 3 4 5 6 7 8 9 10 11 12 13 Total Week ending 14-Aug-15 21-Aug-15 28-Aug-15 04-Sep-15 11-Sep-15 18-Sep-15 25-Sep-15 02-Oct-15 09-Oct-15 16-Oct-15 23-Oct-15 30-Oct-15 06-Nov-15 13 weeks
CASH IN TRUST
Cash receiptsInflows from customer deposits for travel services 7,960 9,129 8,428 8,213 6,726 6,797 7,151 9,020 9,059 8,704 10,126 9,770 7,917 109,000
Cash disbursementsOutlflows to travel suppliers (4,750) (4,700) (5,040) (3,825) (3,792) (3,980) (4,325) (3,956) (5,555) (5,427) (5,700) (5,384) (4,827) (61,260) Outflows to other vendors (1,625) (1,625) (1,625) (927) (927) (927) (927) (927) (2,036) (2,036) (2,036) (2,036) (1,581) (19,240)
Total cash in trust disbursements (6,375) (6,325) (6,665) (4,752) (4,719) (4,907) (5,253) (4,883) (7,592) (7,463) (7,737) (7,421) (6,408) (80,500)
Net trust cash flow 1,585 2,804 1,763 3,461 2,007 1,889 1,898 4,137 1,468 1,240 2,389 2,349 1,508 28,500
Opening balance of cash in trust 16,721 15,732 15,962 15,151 16,604 16,604 16,487 16,378 18,543 18,872 18,973 20,223 21,434 16,721 Net trust cash flow 1,585 2,804 1,763 3,461 2,007 1,889 1,898 4,137 1,468 1,240 2,389 2,349 1,508 28,500 Outflows to operating cash (2,574) (2,574) (2,574) (2,007) (2,007) (2,007) (2,007) (1,972) (1,139) (1,139) (1,139) (1,139) (362) (22,640)
Ending balance of cash in trust 15,732 15,962 15,151 16,604 16,604 16,487 16,378 18,543 18,872 18,973 20,223 21,434 22,580 22,580
OPERATING CASH
Cash receiptsInflows from accounts receivable and customer rebates 410 410 1,140 410 410 410 1,134 407 407 407 407 1,134 406 7,492 Inflows from cash in trust 2,574 2,574 2,574 2,007 2,007 2,007 2,007 1,972 1,139 1,139 1,139 1,139 362 22,640 Inflows from rental sublease - - - - - - - - - - - - - -
Total operating cash receipts 2,985 2,985 3,714 2,417 2,417 2,417 3,141 2,379 1,546 1,546 1,546 2,273 768 30,132
Cash disbursementsOutlflows to travel suppliers (1,674) (927) (927) (983) (643) (577) (577) (997) (921) (837) (837) (837) (1,192) (11,929) Outlflows for rent and utilities - (169) - (183) - (169) - (169) (13) (169) - - (182) (1,055) Outflows for payroll and benefits - (1,365) - (1,379) - (1,368) - (1,376) - (1,369) - (1,369) - (8,225) Outflows for capital expenditures (49) (49) (49) (48) (48) (48) (48) (48) (39) (39) (39) (39) (42) (584) Outflows for professional fees (112) (111) (111) (111) (113) (111) (111) (111) (111) (111) (111) (111) (111) (1,445) Outflows for selling, general and adminstrative expenses (204) (203) (260) (161) (161) (192) (192) (173) (213) (213) (213) (213) (213) (2,611)
Total operating cash disbursements (2,038) (2,824) (1,347) (2,865) (965) (2,465) (928) (2,873) (1,296) (2,738) (1,200) (2,569) (1,740) (25,849)
Net operating cash flow 947 160 2,368 (448) 1,451 (49) 2,212 (494) 250 (1,192) 346 (295) (972) 4,284
Opening balance of operating cash 8,080 9,026 9,187 11,554 11,106 12,557 14,509 16,721 16,227 16,476 15,285 15,631 15,335 8,080 Net operating cash flow 947 160 2,368 (448) 1,451 (49) 2,212 (494) 250 (1,192) 346 (295) (972) 4,284 Red Label funding (Commitment Agreement) - - - - - 2,000 - - - - - - - 2,000
Closing balance of operating cash 9,026 9,187 11,554 11,106 12,557 14,509 16,721 16,227 16,476 15,285 15,631 15,335 14,363 14,363
To be read in conjunction with the attached Summary of Notes and Assumptions
TravelBrands Inc. August Cash Flow Forecast Summary of Notes and Assumptions
1. The August Cash Flow Forecast has been prepared by the Company based on unaudited information solely for the purpose of projecting the cash receipts and disbursements of TravelBrands during the CCAA Proceedings. The August Cash Flow Forecast is presented on a weekly basis for the period August 8, 2015 to November 6, 2015 (the “Forecast Period”).
2. The August Cash Flow Forecast has been prepared primarily based on historical trends and Senior Management’s current forecast expectations with updates based on experience since the beginning of the CCAA Proceedings. The actual timing and amount of receipts and disbursements may vary from forecast and the variances may be material.
3. The August Cash Flow Forecast is presented in thousands of Canadian dollars.
4. The August Cash Flow Forecast is shown in two sections: (a) receipts and disbursements relating to cash held in-trust; and (b) receipts and disbursements relating to operating cash.
5. TravelBrands opening cash position as at August 8, 2015 was approximately $16.7 million of cash held in-trust and $8.1 million of operating cash.
6. Cash held in-trust relates to deposits from customers that have paid for travel services that have not yet been rendered by the Company.
7. The Company may use the cash held in-trust to pay certain trade suppliers that require payment in advance of travel. Trust cash cannot be used to settle supplier obligations related to travel services for customers that have already travelled or for payment of other non-trade obligations. The disbursements from cash-in-trust have been forecast by category and include payment for airfare, hotels, cruises, car rentals, tour packages and attraction ticket bookings.
8. The Company’s obligation to hold customer deposits in trust ceases after the customer has traveled, at which point, TravelBrands moves the cash from its trust accounts to its general accounts. The cash can then be used to pay the Company’s outstanding obligations.
9. Accounts receivable collections relate to customers that have previously travelled and have been assumed to be collected in accordance with the Company’s existing terms.
These receipts also include rebates related to commissions, overrides, segment fees, and other miscellaneous revenue earned by the Company.
10. The rent collected from sublets relate to the Company’s sublease agreements for the property at 75 Eglinton. These collections have been removed from the August Cash Flow Forecast as the 75 Eglinton lease has been disclaimed.
11. The payments to suppliers from operating cash have been forecast by category and include payment for airfare, hotels, cruises, car rentals, tour packages and attraction ticket bookings related to travel services that have already been provided.
12. The negotiations between Sears and the Company noted in the First Report have resulted in the signing of the Amending Agreement dated July 6, 2015. The August Cash Flow Forecast includes payments required to Sears under the Amending Agreement.
13. The August Cash Flow Forecast assumes that rent is paid semi-monthly, on the 1st and 15th of the month, during the CCAA Proceedings. These costs relate to the Company’s head office and regional offices. Rent also includes occupancy costs, utilities and realty taxes. Rent does not include payments made for the 75 Eglinton property as this lease has been disclaimed.
14. Other non-trade disbursements include payments for telephone supporting the Company’s offices and call center, computer servers and maintenance and capital expenditures.
15. Professional fees include payments to the Company’s legal counsel, the Monitor and the Monitor’s legal counsel.
16. The $2 million of funding from Red Label included in the August Cash Flow Forecast is provided pursuant to the Commitment Agreement which provides financial support to TravelBrands during the CCAA Proceedings. Funding will be provided if and when it is needed determined by the Company and Red Label in consultation with the Monitor.
17. The August Cash Flow Forecast does not reflect the issuance of any new letters of credit or increases to any existing letters of credit.
