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Supreme Court ruling affects creditors

Credit unions might have to take on more exposure when they lend to a company that has any sort of regulatory obligations such as pollution cleanup, Canadian Underwriter reported this past March.

This past January, the Supreme Court of Canada, in Orphan Well Association v. Grant Thornton Ltd., ruled that a trustee in a bankruptcy cannot simply “walk away” from a bankrupt company’s oil and gas wells.

Toronto underwriter Miles Foxworth stated that he expects lenders or creditors will require their borrowers to buy environmental coverage before they are willing to provide loans, reported Canadian Underwriter.

The ruling affects the amount of money a creditor could receive as a result of the bankruptcy process, as they will come second to any sort of regulatory obligation. ◊