Paystone: the owners want to buy it back, and BDC got a few hours' notice

Justice Myers granted Paystone Holdings Inc. and its affiliates an initial order under the CCAA on June 5, 2026. The applicants met the formal requirements: each operates or has assets in Canada, is insolvent, and has more than $5 million in debt, per Endorsement of Justice Myers, June 5, 2026, para. 1.

The stay runs ten days. Almost everything else in the two-page endorsement is a reservation.

Who owns the debt, and who wants the business

Two facts, stated in consecutive paragraphs, set up everything that follows.

The applicants recently restructured their senior debt. Their former lending syndicate sold their positions at a significant discount to Sandton, in light of the applicants' inability to pay, per Endorsement, June 5, 2026, para. 2.

And the applicants intend to move at the comeback hearing on June 15 to approve a sale of the business to a company controlled by its current ultimate owners. The buyer proposes to assume the new senior debt and leave the applicants' subordinated secured debt, unsecured notes, and much of their trade debt stranded and unpaid, per Endorsement, June 5, 2026, para. 3.

Neither of those is improper. A syndicate selling at a discount to a fund that specialises in distressed positions is an ordinary secondary-market event, and it is often what makes a restructuring possible — a lender that has already written down its position can accept an outcome the original holder could not. A sale to existing owners, structured around assumed senior debt, is likewise a recognised shape.

But stated together, in the endorsement's own sequence, they describe a transaction in which the people who owned the business before will own it afterward, the debt that survives is debt bought at a discount, and the constituencies who lose everything are the ones ranking below.

That is precisely the transaction a court examines most carefully, and it is why the rest of the endorsement reads as it does.

The notice passage

The applicants gave a few hours' informal notice of the first-day hearing to BDC, the subordinate secured creditor — one of the parties whose debt the proposed sale would leave unpaid.

Justice Myers' response is the most useful paragraph in the endorsement, and it is worth quoting nearly in full:

I know that the CCAA allows hearings without notice. But where it is obvious that a party with a significant interest will be materially affected by a proceeding, the Applicants ought to have done better. What prejudice could notice have caused? The only person who suffers from a raucous hearing is the judge who has to listen and then write more than might otherwise be required. Perhaps BDC might have objected to a sale approval hearing being brought back so soon. But by not giving it notice (and I do not count today's email as effective notice) isn't BDC's position on timing stronger?

Per Endorsement, June 5, 2026, para. 4.

Three things are being said, and each is worth separating out.

The statutory permission is not the standard. Section 11 of the CCAA lets a court proceed without notice. That the Act permits it does not mean a debtor should do it to a party it knows will be materially affected.

The cost of notice falls on the wrong person's convenience. The only downside identified is that the hearing would take longer and the judge would write more — which is to say, the reason not to give notice was not prejudice to anyone but inconvenience to the applicants and the court.

The tactic is self-defeating. The objection the applicants might have been avoiding — that the sale approval hearing was being brought back too soon — is now a stronger objection than it was, because BDC can say it was not told. A short notice period is an argument against an accelerated timetable. Depriving a creditor of notice supplies it with the argument.

Practitioners bringing a first-day motion that sets a sale approval ten days out, on a transaction to a related party that wipes out a known secured creditor, should read that paragraph before deciding who is on the service list.

The stay was nonetheless granted, to June 15, "to allow the Applicants breathing room to seek to move forward in good faith", per Endorsement, June 5, 2026, para. 5 and Initial Order, June 5, 2026.

"He is not an officer of the court"

No DIP charge and no D&O charge were sought — itself unusual, and consistent with a filing whose purpose is to reach a sale in ten days rather than to fund operations.

The administration charge sought was modest, and the court noted it "will not prime anyone unless or until it is reargued on notice to them", per Endorsement, June 5, 2026, para. 6.

Then a question directed at the comeback hearing:

On the comeback hearing, I will need better evidence and argument for including the CRO in this charge. Is he not indemnified by the senior secured lenders? He may have the title CRO, but he is not an officer of the court.

The distinction matters and is easy to lose. An administration charge secures the professionals whose work the court depends on — the monitor, the monitor's counsel, the debtor's counsel — because those are the people discharging functions in and for the proceeding. A chief restructuring officer is an officer of the company. Whatever the title suggests, the CRO is engaged by the debtor and, here, may already be indemnified by the senior secured lenders — which would mean the charge is securing an exposure someone else has agreed to cover.

That is a question worth asking on any administration charge that includes a CRO: who else has promised to pay this person, and does the estate need to promise it too?

Critical suppliers, and a line item

The authority to make pre-filing payments to critical suppliers was, the court found, narrowly sought and properly circumscribed by several conditions, with counsel advising there is no expectation of material amounts being paid on pre-filing claims.

The court appointed the monitor as asked, and added a reporting requirement of its own: an invitation to the monitor to report the quantum of pre-filing claims paid as a line item in the debtors' cash flows, excluding employee-related claims that need not be segregated from employee expenses generally, per Endorsement, June 5, 2026, para. 7.

That is a light-touch and effective control. Critical supplier authority is granted on an assurance about how it will be used; making the usage a visible line in the cash flow means the assurance is testable at the next hearing without anyone having to bring a motion to find out.

And the affidavit

The endorsement closes on the evidence:

Mr. Zalev is not a court-appointed officer or put forward as an independent expert witness. I have concerns about the amount of unattributed hearsay and opinion evidence purportedly adduced in his affidavit.

Per Endorsement, June 5, 2026, para. 8.

First-day affidavits are habitually written in a register that mixes what the deponent knows, what the company's advisors have concluded, and what everyone hopes the court will accept about value and alternatives. On an uncontested first-day motion that usually passes without comment.

It is not passing here, and the reason is the calendar. The same record is expected to support a sale approval ten days later — a sale to the owners, over the heads of the subordinated creditors. An affidavit carrying unattributed hearsay and opinion is a thinner foundation for that than for a stay.

Four reservations, in two pages, on an order that was granted. All of them are addressed to June 15.