Executive Summary: Key Legal and Evidentiary Issues

• Competing applications required the Court to choose between a receivership order under the BIA sought by RBC as agent for the lending syndicate and an initial order under the CCAA sought by Energera, determining who would control the SISP going forward.

• Energera defaulted under the June 28, 2024 amended and restated Credit Agreement, entered into a Forbearance Agreement on February 14, 2025 (amended five times), and ran a SISP that generated only expressions of interest that fell far short of paying out the Syndicate’s debt of over $39 million.

• The Syndicate, as senior secured lenders with Security over Energera’s property, argued that a CCAA process would impose additional costs (including an Administration Charge and a Directors and Officers Charge, and likely interim lending and related charges) ranking ahead of their Security, even though it appeared they were the only stakeholders likely to see any recovery.

• The evidence did not establish any chance of refinancing the existing facilities, and both sides contemplated a SISP that could result in a going-concern sale of Energera, likely by way of an asset sale, but Energera’s prior SISP and the subsequent “White Knight” offer remained well below the amount required to repay the Syndicate.

• The Court considered that Energera’s management had already been given a sufficient opportunity to restructure or sell the business during the forbearance period and had executed a Consent Receivership Order as part of the Forbearance Agreement, undermining its request for another opportunity to remain in control under the CCAA.

• The Court concluded that a BIA receivership administered by a professional insolvency firm was more appropriate and that it was just and convenient to appoint a receiver; the decision records Energera’s indebtedness as over $39 million but does not specify the amount that will ultimately be realized for the Syndicate.

Factual background and the credit relationship

Energera Inc. (formerly known as Frac Shack Inc.), together with Energera International Inc. (formerly Frac Shack International Inc.), Energera America Inc. (formerly Frac Shack American Inc.), and Sandtinel LLC, operated as an oilfield services group headquartered in Spruce Grove, Alberta. Energera operated in several Canadian provinces and US states and also in South America through a majority-owned subsidiary based in Argentina. Energera employed over 130 people, with approximately half of those employees based in Alberta. Energera had a long-standing relationship with a lending syndicate (the “Syndicate”), for which the Royal Bank of Canada (“RBC”) acted as agent. Over time, membership in the Syndicate varied, and a notable change occurred when RBC acquired HSBC Bank Canada, which had been the lead arranger and administrative agent under the original credit agreement. On June 28, 2024, Energera and the Syndicate entered into an amended and restated credit agreement (the “Credit Agreement”). Under the Credit Agreement, the Syndicate made available a non-revolving credit facility in the maximum principal amount of $49,700,000, and RBC made available an operating facility in the maximum principal amount of $7,500,000. The current indebtedness under these facilities exceeded $39 million. As part of the Credit Agreement, Energera gave several financial covenants (the “Covenants”), including a covenant concerning the ratio it was required to maintain between EBITDA and debt, and granted various security interests in its property (the “Security”) to secure the credit facilities.

Defaults, Forbearance Agreement, and the SISP

Energera breached several of the Covenants, thereby committing acts of default under the Credit Agreement. Among other things, Energera breached the covenant concerning the required EBITDA-to-debt ratio. In response, the Syndicate and Energera entered into a Forbearance Agreement on February 14, 2025 (the “Forbearance Agreement”), which was amended five times in 2025. Under the Forbearance Agreement, Energera acknowledged the events of default under the Credit Agreement and the Security, and the Syndicate agreed to forbear in relation to those events of default until the earlier of January 31, 2026, or the occurrence of additional defaults. The Forbearance Agreement was amended to relieve Energera of the obligation to make principal payments. Energera had not made a principal payment since September 30, 2025, although it continued to make interest payments. As part of one of the amendments to the Forbearance Agreement, Energera signed a Consent Receivership Order and agreed not to oppose a receivership application. The Forbearance Agreement also required Energera to run a sales and investment solicitation process (“SISP”). Energera hired a financial advisory firm to assist with the SISP. The SISP was promoted to 187 parties; several of these parties engaged in preliminary diligence and attended management presentations. The only expressions of interest resulting from the SISP proposed terms that would have fallen far short of paying out the Syndicate. In addition, Energera’s management made a proposal to the Syndicate that would have resulted in an extension of the Credit Agreement for 48 months on revised terms.

Demand, enforcement steps, and the “White Knight”

On February 6, 2026, the Syndicate demanded repayment and issued Notices of Intention to Enforce Security under s 244(1) of the BIA. RBC, as agent for the Syndicate, filed a receivership application on February 17, 2026, returnable on February 24, 2026. When the receivership application came before the Court on February 24, 2026, Energera requested an adjournment to permit it to engage in discussions with a potential “White Knight.” The Court granted the adjournment because the risk to the Syndicate from a two-week delay was assessed as low, and Energera’s management was to be given a chance to explore a potential transaction with the “White Knight.” The White Knight made an offer to Energera on March 5, 2026. That offer was significantly below the amount required to repay the Syndicate and also contemplated a large no-fault termination fee in favour of the White Knight if the transaction did not proceed. The White Knight offer was not acceptable to the Syndicate. Energera also advised the Court that, in the day or so prior to appearing on the application, it had received another “formal expression of interest from an additional, sophisticated third party,” and submitted that this was evidence of a robust market for the company or its assets.

Competing applications: BIA receivership vs. CCAA initial order

The matter came before the Court as “a case of battling applications.” RBC, as agent for the Syndicate, sought a receivership order over Energera and the related companies pursuant to the BIA. Energera opposed the receivership application and instead asked the Court for an initial order under the CCAA. The Court noted that there was no doubt Energera would be subject to an insolvency process; the question was which process was most appropriate. Energera submitted that the CCAA was preferable because it had strong cash flow and there was no imminent risk to the Syndicate’s Security. Energera argued it should be given an opportunity to run a SISP and that it was best for that process to be administered by Energera’s current management. The Syndicate submitted that it had been patient, pointing to the Forbearance Agreement, which was amended multiple times and extended over approximately a year to facilitate the company running a SISP. The Syndicate’s position was that the SISP conducted during the forbearance period had revealed insufficient value in the business to pay out the debt to the Syndicate and that there was no reason to believe management would be any more successful running a SISP under the CCAA than it had been during the forbearance period. The Syndicate wanted to install a receiver to run the SISP. The Court observed that, in most cases, the choice between a BIA receivership and a CCAA process is “a question of who should be ‘driving the bus’ – management or a professional insolvency firm,” sometimes involving questions of trust or confidence and sometimes questions of economic interests, particularly where senior secured creditors are unlikely to be paid out in full.

The framework for deciding between CCAA and BIA

The Court referred to an article by Emma Newbery, Liam Byrne, and Valerie Cross, “Should I CCAA Stay or Should I BIA Go: A Review and Analysis of Judicial Treatment of Competing CCAA and BIA Applications” (2023) 21 Annual Review of Insolvency Law, which identified factors used by courts when considering competing CCAA and BIA receivership applications. From that survey, the authors proposed a framework of six questions addressing: (1) whether the debtor-creditor relationship supports granting CCAA relief or favours a receivership; (2) whether CCAA or receivership would maximize asset value; (3) whether there is a possibility of refinancing and continuing as a going concern; (4) whether CCAA or receivership would be more beneficial to stakeholders; (5) whether the behaviour of the debtor and creditors favours one process; and (6) whether specific tools under the CCAA or BIA favour one statute. The Court found this framework useful and added two further questions: (1) whether management had already had a sufficient opportunity to restructure or sell the company or its assets; and (2) whether the company had executed a consent receivership order.

Relationship between Energera and the Syndicate

In applying the framework, the Court found that the relationship between Energera and the Syndicate had deteriorated but was not irreparably damaged such that receivership was the only option. The Syndicate’s position was that Energera’s management had demonstrated during the forbearance period that it was incapable of generating an attractive offer for the business or assets. The Syndicate therefore submitted that a professional receiver should take charge of the SISP to maximize value. The Court characterized this as a case of the Syndicate having more trust or confidence in the proposed receiver than in Energera’s management, rather than a complete breakdown of the relationship. The Court stated that the Syndicate’s preference for a receiver-led SISP was supported by the facts.

Value maximization, cost, and transparency considerations

With respect to maximizing the value of Energera’s assets, both parties contemplated running a SISP, and the Court assumed that both management and the proposed receiver were capable of doing so. On that point, there was “not much to choose” between the competing strategies in terms of value realization. The difference arose in terms of the cost of the process. The Court noted that CCAA processes are typically more expensive than receivership processes, citing BCIMC Construction Fund Corporation et al v The Clover on Yonge Inc, 2020 ONSC 1953 at para 93. The proposed CCAA initial order in this case provided for a Directors and Officers Charge and an Administration Charge that would have priority over the existing Security. The Syndicate also posited that interim lending and an interim lending charge with priority over the existing Security were likely in an extended CCAA scenario. The Administration Charge would cover the costs of the proposed Monitor, the proposed Monitor’s counsel, and Energera’s counsel. The Syndicate argued, relying on Affinity Credit Union v Vortex Drilling Ltd, 2017 SKQB 228 at para 37, that because a SISP was unlikely to result in the Syndicate being paid out, it would effectively be paying for everything secured by these charges. The Court accepted that, although the Syndicate would also effectively be paying for the receiver in a receivership, it was reasonable to expect that the expenses would be less than under the CCAA, where the court process is more exacting and involves directors and officers and more insolvency professionals. The Court acknowledged that a trade-off in proceeding by receivership is the loss of some of the transparency associated with the CCAA. Under the CCAA, there is a comeback hearing, regular reporting by the Monitor, and stay extensions that allow stakeholders to learn how the matter is progressing and to raise objections. However, the Court stated that transparency is more important where multiple stakeholders have a genuine interest in the proceedings. In this case, where there was good reason to believe that the Syndicate was the only party with an economic interest in the proceedings, transparency was less important. The Court also emphasized that a BIA receivership is still subject to court supervision and that receivers are accountable for their actions.

Refinancing prospects and going-concern sale

On the question of refinancing and continuation as a going concern, the Court found that Energera had not established that there was any chance of refinancing. The evidence from the approximately one-year forbearance period indicated that new financing sufficient to replace the existing financing was unlikely to materialize. Both Energera and the Syndicate contemplated a SISP that could see Energera sold as a going concern, though it was likely that any such transaction would be structured as an asset sale. Both parties agreed in oral submissions that sale as a going concern appeared to be the best scenario for maximizing value. The Court observed that sale as a going concern only favours a CCAA process if current management is required to run the business before its sale, and that even in a receivership it is possible for a receiver to retain some or all of the current management team on mutually agreeable terms. When asked whether current management would stay on if requested by a receiver, Energera’s counsel was unable to answer. The Court noted that sale as a going concern is possible in a receivership but more typically seen under the CCAA, citing JBT Transport Inc (Re), 2025 ONSC 1436 at para 44, and that liquidation is possible under the CCAA but more common in a receivership, citing 9354-9186 Québec inc v Callidus Capital Corp, 2020 SCC 10. The Court concluded that this factor was not of assistance on the facts of the present case.

Stakeholder interests and parties’ conduct

Regarding which process would be more beneficial to stakeholders, the Court stated that a CCAA process is more appropriate than a receivership where there is a reasonable prospect of recovery for multiple stakeholder groups, as the CCAA offers a transparent process and a framework for the interests of all stakeholders to be considered. Where, as in this case, it appeared that the senior secured lenders were the only stakeholders who would see any recovery, the Court found that the CCAA process was contrary to the interests of the senior secured lenders because of the additional expense and because it offered no practical benefit to other stakeholders, referring to Shire International Real Estate Investments Ltd (Re), 2010 ABQB 84 at para 9. On the conduct of the parties, the Court found that both Energera and the Syndicate had acted in good faith and that their behaviour did not favour one process over the other. On the availability of statutory tools, the Court concluded that both the CCAA and the BIA could accommodate whatever steps were required under the contemplated SISP and could distribute proceeds to creditors.

Management’s prior opportunity and the Consent Receivership Order

On the additional factor of whether management had already had a sufficient opportunity to restructure or sell the company or its assets, the Court noted that the Syndicate could have brought its receivership application when the defaults occurred in early 2025. Instead, through the Forbearance Agreement, the Syndicate gave Energera an opportunity to save itself. The Court observed that had Energera not agreed to the Forbearance Agreement and instead sought CCAA protection, it might have been given an opportunity to run a SISP under the supervision of a court-appointed Monitor, but that did not happen. Instead, Energera ran a SISP on its own and failed. Energera blamed the failure of the SISP on the Syndicate, asserting that the Syndicate insisted on offers that would pay out the debt in full and that this prevented the SISP from succeeding. The Court rejected this position as being “belied by the fact that several expressions of interest were received at less than the full debt amount and were provided to the Syndicate.” The Court held that Energera’s management team had their “shot” at selling or restructuring the company or its assets and failed, and stated that there was no reason to think they would achieve a better result in the context of a CCAA process. The Court found that the Syndicate’s position that “this time the SISP should be run by a professional receiver” made sense. On the factor of the Consent Receivership Order, Energera submitted that it executed that order under duress. The Court interpreted this as duress in a colloquial sense rather than a legal invocation of the doctrine. The Court found that Energera was a sophisticated entity represented by counsel in a difficult financial situation that agreed to the terms of the Forbearance Agreement, including the Consent Receivership Order, and that Energera could have refused and sought CCAA protection instead but decided that trying to salvage its business under the terms offered by the Syndicate was preferable. The Court concluded that “that is not duress.” The Court noted that it had previously recognized that Forbearance Agreements and Consent Receivership Orders are important tools in insolvency practice, citing ATB Financial v Mayfield Investments Ltd, 2024 ABKB 635 at para 40, and quoted Justice Mew’s statement in Ashcroft Urban Developments Inc (Re), 2024 ONSC 7192 at para 113, about receivership giving effect to the bargain made between secured lenders and debtors and transferring control from debtors in whom confidence has been lost to creditors. The Court stressed that the existence of a Consent Receivership Order does not remove judicial discretion; the Court must still determine that a receivership is just or convenient. However, the existence of such an order undermines protests by management that it should be given another opportunity to “drive the bus” when that order was part of the consideration for management already having a chance to salvage the business. The Court added that if there had appeared to be more value in Energera’s business and another group of stakeholders with a potential economic interest in the outcome, the argument against honouring the Consent Receivership Order might have carried more weight. On the facts as they stood, the Court found no compelling argument against enforcing the bargain that a receiver would be the appropriate remedy if the forbearance period expired without a successful sale or restructuring transaction.

Ruling and overall outcome

In conclusion, the Court framed the question as whether a management-led CCAA process or a BIA receivership process administered by a professional insolvency firm was more appropriate in the circumstances. The Court held that the BIA receivership process was more appropriate than the CCAA process and that it was just and convenient to appoint a receiver. As a result, a receiver is to be appointed under the BIA over Energera and its related companies, and Energera’s request for an initial order under the CCAA was not granted. The decision records that the current indebtedness under the credit facilities exceeds $39 million and that previous expressions of interest and the White Knight offer were significantly below the amount required to repay the Syndicate; the reasons do not specify the amount that will ultimately be recovered under the receivership process.