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BAT's Canadian arm gets CCAA protection

By Oliver Haill

Date: Wednesday 13 Mar 2019

(Sharecast News) - British American Tobacco's Canadian subsidiary, Imperial Tobacco Canada, has been given protection under the local Companies' Creditors Arrangement Act laws in order to avoid becoming liable for all damages under various Canadian tobacco litigation cases.
The CCAA will allow ITCan to restructure its financial affairs to avoid bankruptcy, bringing together all outstanding litigation against the firm in a court-supervised process while enabling it to continue trading.

ITCan's decision followed the recent lawsuit brought by a group of Quebec smokers that has resulted in the industry being jointly liable for a maximum of C$13.6bn and the recent CCAA protection sought and gained by one of the other Canadian tobacco companies, JTI-Macdonald.

If ITCan had not also obtained court protection, it could have been required to pay for all or part of JTI-Macdonald's share of the Quebec judgment, in addition to its own C$9.2bn share.

In addition to the Quebec judgement, the business is subject to sizeable healthcare recoupment damages that significantly exceed its assets.

In seeking CCAA protection, BAT said its subsidiary will "look to resolve not only the Quebec case but also all other tobacco litigation in Canada under an efficient and court supervised process, while continuing to trade in the normal course".

BAT said it will also continue to review the £2.3bn of goodwill relating to the subsidiary on the group's balance sheet, and noted that it has not received dividends from ITCan since 2014.

A spokesperson said: "Imperial Tobacco Canada has informed us that it disagrees with the Court's judgment. However, we understand that CCAA protection will provide Imperial Tobacco Canada an opportunity to settle all of its outstanding tobacco litigation under an efficient and court supervised process whilst continuing to run its business in the normal course."

Broker Liberum said: "We're told the litigation will probable take a couple of years to settle. We've previously discussed this and believe most watchers of BAT shares were aware of the potential for this outcome.


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