Baffinland: the court puts the CRO in the driver's seat

On October 14, Justice Jana Steele approved the secured lenders' form of sale and investment solicitation process for Baffinland's Mary River iron mine "with the CRO having the ultimate decision-making power", and dismissed the debtors' motion for their own, per Re Nunavut Iron Ore, 2026 ONSC 5800, Oct. 14, 2026, para. 5, Sixth Report of the Monitor, App. A, p. 18. The choice between the operating committee and the chief restructuring officer "may appear academic at first blush," the judge writes, but the decision-maker "will have the authority to make critical decisions, including waiving bidding criteria, selecting the successful bid, and finalizing any resulting transaction," per 2026 ONSC 5800, paras. 1, 4, App. A, p. 18. The mine is on Baffin Island, about 1,000 kilometres northwest of Iqaluit, and Baffinland is, in the court's words, "Nunavut's largest private sector employer," per 2026 ONSC 5800, paras. 7–8, App. A, p. 19.

The reasons are in the record as Appendix A to the monitor's Sixth Report of October 23, which describes the approval as "subject to certain amendments thereto", per the Sixth Report of the Monitor, Oct. 23, 2026, para. 10. The court was advised, the reasons say, that "the night before the attendance an agreement was reached with Qikiqtani Inuit Association and Nunavut Tunngavik Inc." and that amendments would be required to whichever SISP it selected; once those are final, "the draft order approving the Secured Lenders' Proposed SISP may be sent to my attention," per 2026 ONSC 5800, para. 69, App. A, p. 30. No signed order approving the SISP, and none of its milestone dates, is in the record read for this piece. The positions on each side of the motion were reported here on October 4 and October 8.

A consent right, and who stood behind it

The two proposals were "substantially the same, except that they diverge on who gets the final say on key decisions," per 2026 ONSC 5800, para. 21, App. A, p. 20, and the reasons settle that first on the DIP loan. Export Development Canada's facility is a US$400 million revolving credit facility, of which, the reasons say, approximately US$230 million has been advanced. Its section 27, which the judge quotes with emphasis added, says that "All terms of the SISP, including all Milestones, must be acceptable to the DIP Lender in its reasonable discretion." A footnote observes that the discretion "is similar to the DIP terms that were proposed by the competing DIP put forward by the other creditors," per 2026 ONSC 5800, paras. 14, 30 and n. 3, App. A, pp. 19, 22.

The Energy & Minerals Group, which holds about 74.8% of Baffinland's ultimate equity, had submitted that EDC's ground, "perceived conflicts", "does not satisfy the reasonableness requirement in s. 27 of the DIP Facility." EDC said it was not using its consent right "to supplant the Operating Committee with its nominees or to seize control of the SISP", per 2026 ONSC 5800, paras. 10, 32, App. A, pp. 19, 22–23. The judge resolves the point in two paragraphs. "The fact that the DIP Lender's position is supported by the Monitor, the CRO, and the other secured creditors leads one to the unmistakable conclusion that the DIP Lender is exercising its discretion reasonably under section 27 of the DIP Agreement." Then: "On this basis alone, the Debtors' Proposed SISP should be rejected." The rest of the reasons take up the other primary arguments "For completeness", per 2026 ONSC 5800, paras. 33–35, App. A, p. 23.

Why not step aside

The debtors framed the issue as unprecedented, "whether they should be stripped of their decision-making power"; in the cases they cited, as the reasons summarize the argument, "the debtors relinquished their control; it was not forcibly removed." EDC, the reasons say, located the novelty in an operating committee refusing to step aside while the secured creditors, the monitor and the CRO were telling it to, per 2026 ONSC 5800, para. 38, App. A, p. 23. "As EDC submitted numerous times, the question is why?" the reasons go on. A footnote cites cases in which debtors supported the monitor or the CRO having ultimate decision-making authority, among them CFFI Ventures Inc. (Re), 2026 NSSC 195, and the Toys "R" Us (Canada) SISP that Justice Dietrich approved on April 1, 2026. "Here, the Debtors and EMG have spent tens of thousands of dollars in legal fees, plus significant time, vigorously opposing the suggestion that the CRO (or the Monitor), a neutral court-appointed officer, should have ultimate decision-making authority under the SISP," per 2026 ONSC 5800, para. 39 and n. 4, App. A, pp. 23–24.

Three more independent persons

The operating committee exists under a unanimous shareholder agreement. EMG appoints five of its members and ArcelorMittal two, and ArcelorMittal is the debtors' largest iron ore customer. "While the governance structure is unusual," a footnote says, "such an operating committee is permissible under the governing corporate statute," per 2026 ONSC 5800, paras. 11–12 and n. 2, App. A, p. 19. Among the lenders' governance concerns, the reasons set out royalty agreements under which affiliates of EMG and companies belonging to two members of the debtors' management, among others, agreed to fund Baffinland in exchange for royalties on ore shipped from the Milne port and, once completed, the Steensby port. "Following the receipt of certain complaints from creditors, the Monitor is assessing the validity of the royalty agreements," per 2026 ONSC 5800, para. 40 and n. 7, App. A, pp. 24, 26 and the Fifth Report, Oct. 7, 2026, para. 58.

The debtors' answer was the Independence Mandate the committee adopted unanimously on September 16, under which independent members deliberate and vote where members are conflicted, and which "deems the royalty issue as a conflict, triggering the involvement of the Independent Members." Each of the three members the committee appointed under it is, in the reasons' words, "unquestionably qualified and experienced." The mandate "purports to override" the shareholder-agreement clause giving members the right to act in the best interests of the shareholders that nominated them, and a footnote records that EMG's co-chief executive "confirmed that the members of the Operating Committee have not been acting under this provision of the USA during the CCAA proceedings," per 2026 ONSC 5800, paras. 41–43 and n. 5, App. A, pp. 24–25 and the EMG co-CEO's supplementary affidavit, Sept. 29, 2026, para. 1.

Paragraph 45 is the court's answer to the mandate. "Leaving aside whether it makes sense to bring three more 'independent' persons to the party when there is already a CRO, a Transaction Advisor, and the Monitor, the voting structure contemplated for these independent members effectively ensures that EMG (or Arcelor, as the case may be) retains the same number of votes, albeit through an Independent Member." Its footnote: "If all three EMG appointees are excluded because of a conflict, the EMG appointee gets three votes." Further, "as EDC noted, EMG and Arcelor handpicked and engaged the Independent Members." The paragraph closes: "Ultimately, the Operating Committee has proposed a complex structure at significant cost to avoid the independent CRO overseeing the SISP. Why? Isn't it preferable for someone who is transaction agnostic to run the process?" per 2026 ONSC 5800, para. 45 and n. 6, App. A, p. 25.

The debtors "correctly say," in the reasons' words, that under corporate law shareholders select any board, but the point "disregards the nuance here where the Operating Committee is composed solely of appointees of EMG and Arcelor, equity stakeholders with a massive financial stake in the outcome," per 2026 ONSC 5800, para. 47, App. A, p. 26.