Warehouse One: a tax-loss RVO waits for clarity on WEPPA

Highgate Capital Ltd. and R.I.S. Media Ltd., the two affiliated lenders whose claims now rank first among the secured claims against the former Warehouse One, have expressed an interest in acquiring the company's corporate and tax attributes by credit-bidding certain of the obligations owed to them, through a reverse vesting order, according to the Fourth Report of the monitor, Alvarez & Marsal Canada Inc., dated November 3. By the monitor's account, those attributes include non-capital tax losses of approximately $21 million as of February 28, 2026, a figure projected to increase once the company finalizes its current-year tax filings. The company and the lenders, it says, "have indicated that they do not wish to proceed with an RVO transaction in respect of the Corporate Attributes until there is greater clarity on the impact of any such transaction on former employees who have received payment of their Approved WEPPA Claims," per the Fourth Report of the Monitor, Nov. 3, 2026, paras. 4.2, 5.2, 5.4, 5.7.

The monitor notes that "the state of the law relating to the interaction of RVO transactions and WEPPA eligibility is not fully settled." Recent decisions of the Ontario Superior Court of Justice in Synaptive (Re 1001270243 Ontario Inc., 2026 ONSC 3967) and the Québec Superior Court in Valeo Pharma (Arrangement relative à Valeo Pharma inc., 2025 QCCS 580) "have confirmed that, in appropriate circumstances, former employees may seek relief under WEPPA where they are terminated in connection with the completion of an RVO transaction," it writes. "However, the Québec Court of Appeal granted leave to appeal the Valeo Pharma decision and heard the appeal on September 30, 2025; a decision is still pending." The Attorney General of Canada, the report adds, has sought leave to appeal Synaptive to the Ontario Court of Appeal, per the Fourth Report of the Monitor, Nov. 3, 2026, para. 5.5 and nn. 2–3. The Attorney General's motion for leave in that case was reported here on September 22.

The company's circumstances differ from both, the monitor says. There would be no employee terminations on the completion of an RVO transaction for the corporate attributes, it says: "Rather, the former employees have already been terminated and in most cases have already received payment of their Approved WEPPA Claims." Then it adds: "However, the Monitor is aware of circumstances in which Service Canada has retroactively clawed back WEPPA payments received by former employees in circumstances where an RVO transaction was subsequently completed following their termination," per the Fourth Report of the Monitor, Nov. 3, 2026, para. 5.6. The report does not identify them.

On November 12 the company, now 3883507 Canada Ltd., asks Justice Grammond of the Court of King's Bench of Manitoba to extend its stay of proceedings from December 18, 2026 to and including June 25, 2027. Its notice of motion, dated November 3 and stamped filed the next day, says the extension is "necessary and appropriate" for the company "to continue to evaluate potential transaction opportunities with respect to the Applicant's Corporate Attributes, subject to Court approval of any such transaction," and will let the company complete final tax returns and other administrative steps, per the Notice of Motion of the Applicant (Stay Extension), Nov. 3, 2026, para. 1(b); grounds, paras. 10, 12–14. The monitor supports the request, in part because "if issued during the extended Stay Period, certain pending court decisions will provide greater clarity on the interaction of RVO transactions and WEPPA eligibility." If the company and the lenders decide to go ahead, it says, the extension "will provide the time necessary to structure, document and market-test the transaction (in particular, noting that such a transaction would be a related party transaction)," per the Fourth Report of the Monitor, Nov. 3, 2026, para. 6.1.

The fulcrum creditor and the corporate attributes

When the company was last in court, in September, it obtained authority to make distributions to Highgate and R.I.S. Media up to the aggregate outstanding obligations under their second-lien loans, per the Fourth Report of the Monitor, Nov. 3, 2026, para. 1.6. That hearing, and the liquidation of the chain's stores before it, were reported here on September 12. The proposed monitor described Highgate in May as "an entity affiliated with the Applicant through common ownership," and the Third Report lists both lenders among the company's affiliate lenders, per the Pre-Filing Report of the Proposed Monitor, May 4, 2026, para. 1.7 and the Third Report of the Monitor, Sept. 1, 2026, para. 7.2.

The corporate attributes "were not independently marketed" in the marketing process the monitor ran earlier in the case, the Fourth Report says, though participants in that process "did have the opportunity to propose a transaction relating to the Corporate Attributes." The monitor has also discussed potential transactions with the two lenders, "who are owed approximately $16 million in principal obligations under the Second Lien Affiliate Loans and are the fulcrum creditor of the Applicant," per the Fourth Report of the Monitor, Nov. 3, 2026, para. 5.3.