Executive Summary: Key Legal and Evidentiary Issues

• Macquarie Bank Ltd., owed approximately $40 million as senior secured lender, sought leave to appeal a CCAA order approving debtor-in-possession financing and a priming charge that subordinated its security interest.

• DIP financing was deemed critically necessary by the Monitor to prevent a liquidity crisis and maintain Canacol's oil and gas production operations in Colombia.

• Procedural fairness was challenged by Macquarie on the basis that its adjournment request was denied despite the compressed timing of the DIP financing solicitation and approval process.

• The CCAA judge found Canacol possessed sufficient assets to satisfy all priming charges and Macquarie's loan facility, negating a finding of material prejudice under section 11.2(4) of the CCAA.

• An appeal risked triggering a default under the DIP loan agreement and introducing disruptive uncertainty contrary to the interests of all creditors and stakeholders.

• Leave to appeal was denied by Justice Kirker after weighing all four factors of the leave test, concluding Macquarie failed to meet the required threshold.

The parties and the CCAA proceedings

Canacol Energy Ltd. and its group of companies have oil and gas production operations in Colombia, including supplying natural gas to the Colombian power grid. Macquarie Bank Ltd. is the senior priority lender to Canacol pursuant to a secured term loan, owed approximately $40 million. Other creditors include unsecured noteholders who at the start of the CCAA proceedings were owed approximately $495 million and lenders under an unsecured line of credit owed $200 million. Canacol was granted an initial order under the Companies' Creditors Arrangement Act on November 18, 2025, due to a liquidity crisis, followed by an amended and restated initial order on November 28, 2025.

The DIP financing solicitation process

In advance of the application for the November 28, 2025 order, Canacol and the Monitor advised the court of the plan to carry out a DIP financing solicitation process on an expedited basis. Macquarie and Canacol's other lenders, including the unsecured noteholders and lenders under the unsecured line of credit, were invited to participate in the DIP financing solicitation process. The sole compliant bid was received from an ad hoc group of unsecured noteholders. With the Monitor's support, Canacol then applied for a Second Amended and Restated Initial Order (SARIO), which was granted on December 11, 2025. The SARIO approved the DIP financing and granted the DIP lenders a priming charge ranking in priority to Macquarie's security against Canacol's assets, including assets located in Colombia.

The Monitor's assessment of the liquidity crisis

The Monitor's second report, filed December 10, 2025, set out the view that Canacol had a critical and immediate need for interim financing. Without it, based on the cash flow forecast, Canacol would be unable to maintain oil and gas production operations in Colombia and advance the restructuring process. The failure to obtain DIP financing would destroy any prospect of a successful restructuring and also materially impair Canacol's ability to sustain its supply of natural gas to the Colombian power grid, which would detrimentally affect creditors and stakeholders, including power generation utilities in Colombia.

Macquarie's objections and the adjournment request

Macquarie objected to the DIP financing and the DIP charge. It sought an adjournment of the application to address concerns arising from the compressed timing of the DIP financing solicitation and approval process and so that the evidence upon which Canacol relied could be properly tested, allowing for the application to proceed early in January 2026 on a better record. Macquarie argued that Canacol had sufficient liquidity for this and that any reasonable interim DIP advances required could be protected by an appropriate order. Macquarie also argued that it would be materially prejudiced by the proposed DIP charge.

The CCAA judge's decision on the SARIO

The CCAA judge denied the adjournment request. He found the cash flow statements appended to the Monitor's second report showed a liquidity crisis in the absence of an injection of funds, creating what he described as a "hard stop" on January 10, 2026, when Canacol would more or less run out of cash. He was concerned that adjourning the application to the first week of January would leave insufficient time for the necessary United States court approval and found it was "just too close." He was not satisfied it would be procedurally unfair to Macquarie to proceed without questioning the information presented by Canacol and the Monitor because Macquarie had had access to Canacol financial information and the opportunity to ask any clarifying questions it had between November 28 and December 10, 2025. In approving the DIP financing and priming charge, the CCAA judge considered the factors in section 11.2(4) of the CCAA and decided to exercise his discretion and approve the DIP loan as presented along with the charge. He was satisfied that absent DIP financing, an actual liquidity crisis existed, and that approving the DIP financing and priming charge would provide certainty and enhance the prospect of a viable compromise or arrangement being made. Canacol's management had the confidence of its major creditors other than Macquarie, whose loan was secured but small in comparison to the amounts owing to other lenders. The CCAA judge found that whatever valuation measure was used, Canacol had sufficient assets to satisfy all priming charges and Macquarie's loan facility. He noted that no other obvious or better way to finance Canacol had been presented to the court.

Subsequent developments

The SARIO has been recognized in the United States and in Colombia. There was an advance of $15 million in DIP financing on January 7, 2026. Canacol's application for the approval of a sale and investment solicitation process was approved on January 26, 2026, with letters of intent from interested parties due on March 9, 2026, and binding bids due by April 6, 2026. A second DIP financing advance will be made shortly.

The application for leave to appeal and its dismissal

Macquarie sought leave to appeal the SARIO on grounds it was denied procedural fairness because its request for an adjournment of the application brought on a compressed timeline was denied and because the CCAA judge erred in his assessment of "materially prejudiced" under section 11.2(4) of the CCAA. Justice Kirker of the Court of Appeal of Alberta applied the four-factor leave test from Bellatrix Exploration Ltd v BP Energy Group ULC, 2020 ABCA 178, and found that while the points raised on appeal are of significance to Macquarie, this had to be balanced against the other factors. The questions proposed were not of significance to the practice, as the law with respect to procedural fairness in this context is well established, the adjournment decision was highly fact dependent and a matter of discretion, and the material prejudice inquiry was fact specific and would not significantly impact general insolvency practice. The appeal was found to have little chance of success given the deferential standard of review, and may have been rendered moot by the advance of funds. Justice Kirker concluded that an appeal, even if expedited, would not avoid unduly hindering the progress of the restructuring, as it invites the potential for an event of default under the DIP loan agreement and would introduce disruptive uncertainty that is not in the interests of all creditors and stakeholders. Having carefully considered and weighed all the elements of the test, Justice Kirker concluded that Macquarie had not met the threshold for leave to appeal and dismissed the application. No specific monetary award was ordered in this decision, as the ruling pertained solely to the denial of leave to appeal.