In This Together: Canada’s Debtors and Lenders Take a Calm and Cautious Approach

April 1, 2020
  •  What We Are Seeing:  this post is part of Stikeman Elliott’s series on evolving market insights emerging during the COVID-19 pandemic 

Like our financial advisory counterparts, we are seeing a large increase in inbound calls from debtors, lenders and other stakeholders, worried about what the COVID-19 pandemic means for them.

The speed with which the situation is evolving, across Canada and internationally, has companies scrambling to assess their situations. Many are working to take advantage of potential sources of additional financial support – from government, existing lenders and/or other stakeholders – before proceeding with formal restructuring steps. Questions that we are hearing include:

  • Will government financial support come directly or will it be done through Canadian banks?
  • Will the government seek to limit enforcement or forbearance steps?
  • What actions will the U.S. Government take and what effect will those actions have on Canadian companies?

Our experience to date has been that, for the most part, debtors and their stakeholders are focused on preliminary, informal discussions with their stakeholders. More than has historically been the case, debtors are prepared to proactively reach out to their major lenders/stakeholders, acknowledge the financial situation everyone is facing, and discuss openly the potential paths forward. Companies are attempting to identify any consensual (or sometimes unilateral) steps that could help to extend their financial runways. Examples include:

  • Continuing to draw on available lines of credit despite technical events of default;
  • Rent concessions or deferrals (notably in the retail sector);
  • Informal loan forbearance or interest holidays.

The sense that Canadians are very much “in this together” is playing a part in encouraging creative solutions, to which we are pleased to be able to contribute.

Variations Across Industries

Some industries are being hit harder than others. Retail, travel and hospitality, oil and gas – together with virtually the entire manufacturing sector – are facing particularly difficult situations.


Other than those providing food and drugs, retail outlets across Canada are now mostly shuttered. They have been forced to lay off employees and many are seeking relief from their landlords. The shift to online sales, which was already eroding the viability of many bricks-and-mortar retailers, is being expedited by this crisis. On the positive side, retailers with existing significant online presences are able to respond to the new, albeit diminished, retail buying environment.

Travel and Hospitality

Travel and hospitality businesses have suffered from sharply reduced interest in travel, which has now been followed up with government-imposed travel bans.

Oil and Gas

The Canadian oil and gas sector is suffering from reduced demand, with less consumption as industrial activity declines and individuals stay at home. This only adds to the industry’s preexisting challenges, including increased domestic production and exploration in the U.S., an international price war and concerns about carbon emissions.

Manufacturing and Industrial

Manufacturers and industrial clients were initially suffering from interruptions in their supply chain as well as decreased demand. Government emergency measures have subsequently resulted in complete shutdowns of various manufacturing operations, creating a wide range of legal challenges.

Looking Ahead to the New Normal

Companies are moving swiftly to react to the “new normal” – initially by implementing financial protections to help weather the storm and possibly repurposing their operations on a short-term basis, and then pivoting to longer-term strategizing.

The Courts are partially closed due to the pandemic (see our daily updates here). In Ontario, the Superior Court of Justice is hearing only urgent matters at this time, which are defined as matters where “immediate and significant financial repercussions may result if there is no judicial hearing.” We continue to be available to help our clients consider their options, how best to react, respond and progress through the days and weeks ahead.

DISCLAIMER: This publication is intended to convey general information about legal issues and developments as of the indicated date. It does not constitute legal advice and must not be treated or relied on as such. Please read our full disclaimer at

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