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 TORONTO, May 15 /PRNewswire/ -- Olympia & York Developments Limited today announced that the Ontario Court of Justice has granted an application under the Companies' Creditors Arrangement Act made by Olympia & York and 28 other Canadian companies in the O&Y group. Olympia & York and four of the Canadian companies in the group have also filed petitions for relief under Chapter 11 of the United States Bankruptcy Code. The filings in the United States have been made necessary as a result of the substantial U.S. assets owned by these companies but have not affected the properties owned by O&Y's operating subsidiaries in the United States.
 A presentation was made by Olympia & York in London last week to a representative group of its major lenders which contained detailed restructuring proposals. The company said that the lenders have responded favorably to the proposals and that the proceedings today were an appropriate next step in the restructuring process to allow the details of a comprehensive plan to be completed for the benefit of all concerned.
 Olympia & York and the other Canadian companies which filed under Chapter 11 have substantial assets in the United States, including equity interests in Olympia & York (US) Holdings Company. This is the U.S. holding company of Olympia & York which holds, through other U.S. companies, ownership interests in numerous major properties in the United States. However, none of the U.S. holding company or these other U.S. companies has filed for protection under Chapter 11 and none of their assets or operations are affected by the filings today. The U.S. companies are proceeding with ongoing discussions to achieve consensual restructurings with the few lenders in the United States whose loans are affected.
 Olympia & York also advised that its actions in seeking court protection for its restructuring efforts will not be extended to any of its U.K. business operations.
 The application under the Companies' Creditors Arrangement Act was made to the Ontario Court of Justice (General Division) in Toronto. The Chapter 11 filings were made in the United States Bankruptcy Court for the Southern District of New York in New York City.
 The company stated that its business operations in the United States and at Canary Wharf should not be affected by the proceedings. Certain of the major lenders to the company have encouraged this action, sharing the company's belief that the resulting stability in Canada will assist the furtherance of discussions taking place currently in relation to Canary Wharf and in the United States.
 Gerald Greenwald, president, said: "The proceedings initiated today represent an appropriate step in Olympia & York's restructuring which will ensure the long-term viability of the company. The stabilized environment resulting from these proceedings will enable management to operate the company's businesses more efficiently and allow a greater focus on developing a long-term solution to the company's liquidity problems. The process ensures that the interests of both creditors and the company will be dealt with fairly and evenly in open, court- supervised procedures that create a level playing field."
 With reduced uncertainty, the company anticipates that its ability to retain and attract tenants will be enhanced. The court proceedings will not affect the security of employee payroll, pension and other benefits. All trade and supply creditors will continue to be paid in the normal course of business.
 The court order does not affect the day-to-day operations of those public companies in which Olympia & York is a shareholder, including Gulf Canada Resources Limited and Abitibi-Price Inc. Olympia & York intents to pursue the sale of its interest in Santa Fe Pacific Corporation and to proceed with the privatization of GW Utilities Limited once that company has sold its interests in Home Oil Company Limited.
 The court order envisages the creation of the position of information officer to assure the timely dissemination of information to creditors, the establishment of separate creditor committees to deal with specific concerns of separate creditor groups and a reporting procedure to the court to facilitate court supervision of the process.
 Olympia & York's liquidity crisis was precipitated by the loss of confidence in the company's $800 million commercial paper program which led directly to the company's inability to conclude three major financings then underway. This, combined with a worldwide recession which adversely affected all sectors of the economy, particularly real estate and natural resources, closed Olympia & York's access to capital markets to fund ongoing operations.
 "With the continued support and co-operation of our lenders, we are confident that Olympia & York will emerge from the restructuring as a financially stronger enterprise with the capacity to resume its leadership role among global property developers," Greenwald concluded.
 The Companies' Creditors Arrangement Act (CCAA)
 The CCAA is a federal statute which has as its theme the survival and restructuring of the corporate debtor. This is dramatically different than bankruptcy proceedings which usually end up in liquidation.
 Under the CCAA, if a debtor corporation has an outstanding trust deed to several investors, the corporation can utilize the CCAA. The legislation allows a corporation to reorganize under court supervision.
 The CCAA allows the following to occur:
 (1) a "stay of proceedings" against all creditors, including secured creditors; (2) the debtor continues in possession and control; (3) a negotiating process with creditors; (4) creditors are identified by commonality of interest into different voting classes; and (5) court supervision.
 The debtor's reorganization plan must be approved by a majority in number representing 3/4 in value of the creditors in each class.
 Court Approval
 A reorganization plan will require a positive vote of the various classes of creditors and court approval. As well as assuring itself that all statutory conditions have been met, the court must be satisfied that the plan is fair and reasonable. It looks to see if creditors will receive more than if there was a liquidation or bankruptcy.
 Under the Bankruptcy Act, there is only a limited stay of proceedings against secured creditors and this is the main reason so many corporate debtors are turning to the CCAA. The stay also extends to contractual relationships and can prohibit acceleration of contracts or a refusal to supply services due to prior non payment. The stay can prevent lenders from realizing on the inventory and accounts receivable of the debtor. This allows the debtor the ability to gather moneys to finance itself during the stay process.
 The main point to realize about CCAA is that it is to be looked at as constructive or remedial legislation which has as its primary purpose the rehabilitation of a debtor, so that through the negotiation process, it will survive rather than be liquidated. The CCAA is merely a step in the process towards the restructuring of the debtor. It is becoming much more commonplace to make a CCAA filing in order to begin rehabilitation with creditors taking precipitous steps which would cause the debtor to falter.
 Chapter 11 Proceedings
 Chapter 11 is the part of the U.S. Bankruptcy Code that deals with reorganization. Almost any business entity, corporate partnership or individual is eligible to apply for relief under Chapter 11. (Certain entities such as loan and savings corporations, banks and insurance companies are not eligible.)
 Unlike the Companies' Creditors Arrangement Act which requires an application before the courts, a Chapter 11 case is instituted by the filing of a petition which is purely an administrative function. At the stage of filing no court application is required.
 Once the filing occurs, there is an automatic stay of all proceedings against the debtor. This stay comes into force and effect without the need for a court order. The stay applies to both secured and unsecured creditors of the debtor.
 Theme of Chapter 11
 It is significant to realize that the thinking behind the Chapter 11 process is that, except in extraordinary cases, the debtor is to remain in possession and continue to operate the business. It is felt that at a time of crisis in the business there is a very great need for ongoing management. Thus, once a Chapter 11 filing occurs, the debtor continues to operate the business in the ordinary course without interference from creditors.
 The debtor, in proper cases, can go to court and obtain an order allowing it to deal with its inventory and accounts receivable. The usual method of financing a business under Chapter 11 administration is through debtor-in-possession (DIP) financing whereby the lender obtains a super priority lien for its loans. It should be noted no such provision exists under the CCAA.
 Once a filing occurs, the debtor has 120 days to file a plan (subject to court approved extensions) and 180 days from initial filing to have the plan approved (again, subject to court approved extensions). It is not unusual in large or complex files to have Chapter 11 reorganization run for several years.
 Creditors vote in classes according to commonality of interests. It requires a majority of those voting and representing two-thirds in monetary value in order to obtain approval of a class of creditors. Upon such approval, it is binding on the remainder of creditors within that class.
 The main thrust of Chapter 11 filings is the rehabilitation of the debtor so that liquidation will not occur.
 Administration Orders
 Availability of Administration Order
 In the United Kingdom, a court may make an administration order pursuant to the Insolvency Act, 1985. An administration order gives a company an opportunity to rearrange its affairs while at the same time being protected from action by its creditors. A court will make an administration order if it is satisfied that the company is insolvent and it would be likely to achieve certain purposes, namely: the survival of the company, and the whole or any part of its undertaking, as a going concern; or, the approval of a voluntary arrangement under the act; or, the sanctioning of a compromise or arrangement between the company and certain of its creditors; or, a more advantageous realization of the company's assets than would be effected on a winding up.
 An application for an administration order may be made by the company, its directors, a creditor or by any combination thereof. Once a petition has been presented for an administration order, the status quo of the company against claims by creditors' attempts to achieve the purpose of the administration order is preserved. During the period between the presentation of the administration petition and the making of the order or the dismissal of the petition, no steps may be taken to enforce any security over the company's property or to repossess goods in the company's possession and no other proceedings, execution or other legal process may be commenced or continued, except with leave of the court.
 Consequences of Administration Order
 Once the administration order has been made, any outstanding petition for the winding up of the company is dismissed, any administrative receiver appointed under a floating charge ceases and the receiver must vacate office, any receiver of part of the company's property must vacate office, no resolution can be passed or order made for the winding up of the company and no other steps can be taken to enforce any security over the company's property and no other proceedings may be commenced or continued without leave of the court.
 Administrator's Powers
 The administrator has extremely wide powers. In general, the administrator may do all such things as may be necessary for the management of the affairs, business and property of the company, including the removal of any director of the company and the appointment of any person to be a director; call any meeting of shareholders or creditors and consent to secured or unsecured creditors enforcing their rights.
 Overall, the main purpose of an administration order is to ensure the survival of the company as a going concern. The main difference between an administration order and proceedings under Chapter 11 or the CCAA is that if an administration order is made, the company does not remain in possession of its assets, whereas under Chapter 11 or the CCAA, the company remains in possession.
 -0- 5/15/92
 /CONTACT: Frank Ternan, 416-862-5324, Peter Rosenthal, 212-489-6900, or Georgie Gibbs (London), 011-44-71-494-4040, all for Olympia & York Developments/ CO: Olympia & York Developments Limited ST: New York IN: FIN SU:

GK-TO -- NY029 -- 0653 05/15/92 10:29 EDT
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Date:May 15, 1992

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