Sandvine: a termination order, and no 'tip on the way out' for the purchaser

Sandvine Corporation was founded in Canada in 2001 and headquartered in Waterloo, Ontario, selling software that classified the internet traffic on telecommunications networks, telling a carrier, for instance, which of it was streaming apps or games so that it could plan its network around them. Its customers included approximately 130 of the largest global communications service providers, in approximately 54 countries, per the Affidavit of Jeffrey A. Kupp, Nov. 6, 2024, paras. 30–32. On February 27, 2024, the U.S. Department of Commerce added Sandvine Corporation and certain affiliates to its Entity List, a designation made, in the words of Sandvine Corporation's sole director, Michael T. Sullivan, "as a result of the alleged misuse of Sandvine's products in Egypt," per the Fifth Report of the Monitor, Oct. 8, 2026, s. 2.0, para. 2 and the Affidavit of Michael T. Sullivan, Oct. 6, 2026, paras. 1, 14.

The company's proposal to be removed from the list required it to leave more than 20 jurisdictions "where digital rights risks are high," and the removal came on October 23, 2024. Those countries represented approximately 45% of Sandvine's 2023 annual revenue, the monitor, AlixPartners Restructuring, Inc., reports, per the Fifth Report, s. 2.0, paras. 3–4 and the Sullivan Affidavit, para. 14.

The CCAA began on November 7, 2024, and its sale process sent a teaser letter to approximately 110 potentially interested parties; 13 signed non-disclosure agreements, and by the December 18, 2024 deadline no letter of intent or offer had arrived other than the stalking horse agreement with the Consenting Stakeholders, 97% of a group of secured lenders owed approximately US$431.8 million, per the Second Report of the Monitor, Jan. 24, 2025, s. 3.1, para. 3(b), (g); s. 3.2, paras. 1–2 and the Fifth Report, s. 1.0, paras. 1, 4; s. 2.0, para. 5. Justice Osborne approved that transaction on January 30, 2025, under which, among other things, the first-lien loan claims would become 50% of the common equity of the purchasers' new parent company, subject to dilution by a management incentive plan, the DDTL and DIP loans would become approximately US$125 million of exit term loans, and general unsecured claims not assumed or retained would be extinguished or cancelled for no consideration; it closed on March 3, 2025, and the business emerged as the AppLogic Networks group, per the Endorsement of Justice Osborne, Jan. 30, 2025, paras. 1, 16–19 and the Fifth Report, s. 1.0, para. 6.

The sale left the customer contracts in the exited countries with the sellers, and the proceeding stayed open while the sellers kept serving those customers to their exit dates: March 31, 2025 for government of Egypt customers, and December 31, 2025 for the rest, per the Fifth Report, s. 3.0, paras. 1, 6–8. On October 14, 2026, Justice Dunphy of the Ontario Superior Court of Justice (Commercial List) called the motion to end it "the penultimate step in a reasonably swiftly-run CCAA process," and the termination it asked for "reasonably 'standard form.'" "There was one item where I balked," the endorsement goes on. The item was a release reaching past the court officers to the purchaser, per the Endorsement of Justice Dunphy, Oct. 14, 2026, paras. 1, 3.

Services in both directions

The Transition Services Agreement that Justice Osborne approved with the sale had the sellers and the AppLogic companies (the NewCos) providing services to each other, in four categories, per the Fifth Report, s. 1.0, para. 5; s. 3.0, para. 3. The NewCos supplied the professional, support and maintenance services that the two sellers, Sandvine Corporation and Procera Networks, Inc. (the OldCos), needed to keep performing the exit customers' contracts. The OldCos in turn let the NewCos use, among other things, their bank accounts, payroll systems and credit cards, so that, in the monitor's words, the NewCos could "maintain going-concern operations during a transitionary period without disruption to key business processes like payroll and vendor payments," per the Fifth Report, s. 3.0, paras. 6–10. Since the January stay extension, the monitor reports, those administrative services have been completely transferred, and NewCo management has advised that it no longer needs them, per the Fifth Report, s. 3.0, para. 11.

Certain employees of Procera Networks, Inc.'s United Arab Emirates branch remained its employees after closing rather than moving to a purchaser. Mr. Sullivan swears that the NewCos have since obtained signed contracts from them and processed visas for each of them, and that all have been transferred to their respective NewCos, per the Sullivan Affidavit, paras. 18(b), 20 and n. 3. The last piece was a licence validation service, owned and maintained by the NewCos, that lets the OldCos terminate an exiting customer's licence if the customer violates its end user licence agreement. The monitor understands that providing it "was consistent with the commitments made by Sandvine to the U.S. Department of Commerce," and that once the CCAA ends and Sandvine Corporation assigns into bankruptcy the NewCos will no longer be required to provide it; the two sides have mutually determined that it can end before December 31, 2026, the latest date the agreement set for it, per the Fifth Report, s. 3.0, paras. 14–15, 17–18 and the Sullivan Affidavit, para. 17(b).

When Justice Conway extended the stay to January 30, 2027, on January 26, 2026, the endorsement said the extension "will allow for the continued provision of the Ongoing Business Compliance Monitoring Services," the licence validation service, "… and completion of the wind-down activities of the OldCos," per the Endorsement of Justice Conway, Jan. 26, 2026, para. 4. In its Fifth Report of October 8, the monitor reported each of the services under the agreement "either complete or no longer required," per the Fifth Report, s. 3.0, para. 19.

The one item

The applicants' motion of October 6 sought a release, effective when the proceeding terminates, of AlixPartners as monitor and in its personal capacity, the monitor's counsel, the debtors' counsel, AppLogic Networks OpCo I LLC, AppLogic Networks OpCo II LLC and AppLogic Networks Canada Inc., "and each of their respective affiliates and officers, directors, managers, partners, employees, consultants, legal counsel, advisors and agents," and Michael T. Sullivan, the affiant, per the Sullivan Affidavit, para. 26; draft Order (CCAA Termination), Motion Record, Tab 3, para. 11. In Mr. Sullivan's opinion the proposed released parties "have made substantial contributions to these CCAA Proceedings." For the purchaser, the affidavit points to the exit: "It was an essential part of the Transaction to ensure that Transition Customers' services were not abruptly cut off given the very serious security implications and the risk of disruption to internet connectivity for millions of people. Without the cooperation of the NewCos, it would not have been possible for the Transition Services to be provided to Transition Customers," per the Sullivan Affidavit, paras. 27–28.

The monitor supported the releases as "reasonable and appropriate in the circumstances and consistent with releases that have been granted in connection with the termination of CCAA proceedings in similar proceedings." It noted that the released parties had facilitated and significantly contributed to the proceeding, including through the transition services, that the releases did not reach gross negligence or wilful misconduct, and that each interested party would be served with the motion and have an opportunity to object, per the Fifth Report, s. 4.3, paras. 1, 3–4.