Evidence of meeting #46 for Industry, Science and Technology in the 40th Parliament, 3rd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was c-501.
A recording is available from Parliament.
NDP
John Rafferty NDP Thunder Bay—Rainy River, ON
You're insolvency professionals, I guess. Would that be a good way to put it?
NDP
John Rafferty NDP Thunder Bay—Rainy River, ON
But you're not bond-holders; you're not a corporation. You don't have any particular—
November 23rd, 2010 / 11:40 a.m.
Associate Professor of Law, University of British Columbia; Insolvency Institute of Canada
Except through our pension plans.
Co-Chair, Task Force on Pension Reform, Insolvency Institute of Canada
We represent people as lawyers and financial advisers from the trustee receiver community. We represent all the stakeholders in different files.
NDP
John Rafferty NDP Thunder Bay—Rainy River, ON
Why would you care about the Government of Canada's public policy governing pension plans?
Co-Chair, Task Force on Pension Reform, Insolvency Institute of Canada
We have clients as law firms and as financial advisers. We have clients who retain us to advise them. We take an interest. It is not a completely disinterested look at their situation. You are trying to work through a restructuring and give them the assistance they need to come out of the process alive.
NDP
John Rafferty NDP Thunder Bay—Rainy River, ON
I have one question, then. Mr. Davis could answer this also. I want to ask you your opinion on the Nortel situation. Is it reasonable for professional fees to be $275 million for the first 22 months of Nortel's proceedings under the CCAA , when some pensioners are going to take an enormous hit? I mean, $275 million seems like an awful lot of money for professional fees.
Co-Chair, Task Force on Pension Reform, Insolvency Institute of Canada
Professional fees are an easy target. I don't know what has gone into all those professional fees. If you compare it with the cost to the pensioners, I'm sure it's an easy analysis to say that they're excessive. But that's not the way a restructuring would be viewed by the stakeholders. Professional advisers are necessary, and it is an expensive and complicated process. It's not a trade-off.
NDP
John Rafferty NDP Thunder Bay—Rainy River, ON
Thank you for that answer.
Mr. Boychuk, you mentioned Ms. Urquhart and her report that she tabled. She has tabled a rather comprehensive report concerning countries with preferred or higher status. Would you be willing to table your own report in contrast to that? You said that hers was excessive.
President, BIMCOR Inc., Federally Regulated Employers - Transportation and Communications (FETCO)
I could give you analysis of what the OECD countries have, and who has what in there. Most of the countries referred to in her report are countries that sponsored defined contribution plans, not defined benefit plans. None of the major countries that sponsor defined benefit plans—such as the United States, the U.K., Germany, the Netherlands—have preferred creditor status for defined benefit plans unfunded—
NDP
John Rafferty NDP Thunder Bay—Rainy River, ON
Thank you, Mr. Boychuk.
Canadian Bankers Association, I'd like to ask you a question, and say on the record that you were very kind to meet with me a few weeks ago. I appreciate that. The message I got was that you could make improvements in the way you do things. I think that was part of it.
As you said in your statements, Mr. Randle, it's all about risk. That's really the bottom line—it's about risk. If amendments were made to this bill, that is, if it were diluted to cover unsecured debt, or preferred debt, would the Canadian Bankers Association be amenable to that kind of change? Would that change your opinion at all?
Conservative
The Chair Conservative David Sweet
We're over time now, gentlemen. You'll have to either save that for another questioner or give a written submission to Mr. Rafferty's question.
Thank you very much, Mr. Rafferty.
Now on to Mr. Garneau for five minutes.
Liberal
Marc Garneau Liberal Westmount—Ville-Marie, QC
Thank you, Mr. Chair.
As a legislator, if I have a pensioner in my office and he or she tells me they have contributed to a pension plan during their working career and that they regard this as deferred wages, if their company goes bankrupt after they are on pension, it is probably true to say they have very little alternative but to absorb a loss of pension income. I understand that part. I also understand where many of you are coming from with respect to the importance of having access to credit for companies to prosper and grow, and having certainty in the market.
The fact is that this Bill C-501 is very limited in its scope, although it may not have appeared that way to many people. It does not talk about retroactivity, it simply deals with arrears in special payments up to the moment of bankruptcy. That period of time can vary from one bankruptcy to the next.
What I have been surprised by is the range of analyses and estimates as to the impact of that. I have heard that this is not really that big a deal and it is not going to cause bond market instability, while other people have said the hit is really big.
I am trying to get a sense of that. I haven't got that sense of it. As legislators, where we are talking about prioritizing and the impacts on different groups, whether it's the bond markets or pensioners, it would be good for us to have a real impact, since we need to make decisions like Solomon.
It seems to me, Mr. McKenna, you were talking about this issue. The special payments in arrears didn't seem to be an impossible thing to deal with. I'd like to hear a little more from you and others on that, as to where you situate the problem.
Chair, Corporate Practice Committee, PricewaterhouseCoopers Inc., Canadian Association of Insolvency and Restructuring Professionals
I think we would distinguish the special payments that are in arrears, that are designed to make up the shortfall that exists in the pension. To the extent that those payments that are required to be made under the relevant statutes are in arrears, we see no reason why those should not have super-priority status.
I think the problem, as we see it, becomes more significant if that priority extends to all the arrears.
Liberal
Marc Garneau Liberal Westmount—Ville-Marie, QC
It is your interpretation of the bill that it extends to other arrears?
Senior Vice-President, Ernst & Young Inc., Canadian Association of Insolvency and Restructuring Professionals
If I may, the problem is not with Bill C-501, it is with the other legislation that would then push those special payments—
Liberal
Marc Garneau Liberal Westmount—Ville-Marie, QC
We're talking about Bill C-501. We're not talking about something that might come along.
Senior Vice-President, Ernst & Young Inc., Canadian Association of Insolvency and Restructuring Professionals
Unfortunately, Bill C-9 is something that has already passed and is already law. Certain provisions of Bill C-9 could bring about an acceleration of the payments in an insolvency situation. That brings the entirety of the deficit into play at that point.
Even though we are absolutely in agreement with the fact that the special payments should be protected and should be afforded super-priority status, the other legislation that is out there extends the effect of Bill C-501 to things that are other than just the special payments amount. That is the difficulty.
President, BIMCOR Inc., Federally Regulated Employers - Transportation and Communications (FETCO)
Mr. Garneau, if I could answer your question about the magnitude of the cost, I would just submit to you that the low end or the minuscule costs that you may have seen comes from people who do not understand and actively participate in the debt capital markets.
I believe you have now seen testimony over the last few days and submissions that have been made in the public domain of active capital market participants. Mr. Dafoe is a capital markets dealer. They bring issuers and investors together. You have heard from investors, such as PH&N. I can speak to you on behalf of issuers. I issued billions of dollars of debt in my role as treasurer of Bell Canada.
I think we can certainly tell you that having played in this market and knowing the way it works, the costs would be substantial.
President, BIMCOR Inc., Federally Regulated Employers - Transportation and Communications (FETCO)
I'm talking specifically to Bill C-501.
Conservative
The Chair Conservative David Sweet
Thank you, Mr. Boychuk, and thank you, Mr. Garneau.
Now we go on to our last questioner, Mr. Van Kesteren, for five minutes.
Conservative
Dave Van Kesteren Conservative Chatham-Kent—Essex, ON
Thank you, Mr. Chair.
Thank you all for coming. It's been very enlightening.
I'm pleased to hear, and I was aware of it too, that AbitibiBowater has restructured and has come out of bankruptcy protection.
Much of the dialogue has the unfortunate premise that it's them against us. I think this is an obvious example of how that's just not the case.
I want you to tell the committee one more time why, in a situation such as this, it is important that we not force the hand, so to speak. Maybe you could share with this committee how many you would say, in today's market and considering that we've experienced some real tremors in that market, would be in the position, if a bill like Bill C-501 were enacted, under which the banks would have to pull the trigger? What would your assessment be, just quickly?
Executive Director, Federally Regulated Employers - Transportation and Communications (FETCO)
OSFI, the federal regulating agency, can advise you on the exact number of federally regulated companies that have solvency deficiencies and the percentage of those deficiencies. That data is available.
What would happen is that every single company that has a defined benefit pension plan and that will have a solvency deficiency will have greater difficulty raising capital when it needs to raise capital, because this bill will make their companies more risky.
If you are a company that has, like many of the companies in the pulp and paper industry, like many large Canadian companies in the mining industry, large solvency deficiencies, this bill will create a situation in which if they were on the cusp of bankruptcy they would not be able to get the funds that are necessary. As Mr. Robertson said to me last night, we would not have been able to restructure, if this bill were in place.
So in a sense, while it is intended that this bill protect employees and protect pensioners, it will unfortunately push over the edge companies that are scrambling to restructure, and there will be real losses in employment across this country. The other thing that will happen is that employees across the country who enjoy very handsome defined benefit pension plans today will not have them anymore, because their boards of directors will say, these plans now, with Bill C-501, have far more risks than they used to have, and we're getting out of them. So for hundreds of thousands of Canadians who have fantastic pension plans today and are working for companies that can sustain those plans forever, this bill will kill them, period.