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Third major tobacco company takes creditor protection

On March 22, 2019, Rothman, Benson & Hedges was granted protection from its creditors in Ontario proceedings under the Companies' Creditors Arrangement Act (CCAA). These proceedings will give RBH an opportunity to propose some plan of arrangement which its creditors will then vote on.

The filing comes on the heels of RBH's failed appeal to the Quebec Court of Appeal on a judgment against the company in class-action proceedings for a whopping $15 billion. Two other defendants, Imperial Tobacco Canada and JTI-Macdonald Corp., had both already sought creditor protection earlier in the month.

Formal insolvency proceedings like the CCAA can be a useful tool to resolve class action judgments which are otherwise impossible for the debtor company to pay. The twin goals of such proceedings are: to provide more to the claimants than if the company simply went bankrupt; and to allow the company to continue in business for the benefit of its employees, customers and suppliers.

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