British Am. Tobacco/Imperial Tobacco Canada Ltd. files for CCAA
British American Tobacco p.l.c. has today been informed by its Canadian subsidiary, Imperial Tobacco Canada Ltd (ITCAN), that ITCAN has obtained an Initial Order from the Ontario Superior Court of Justice granting it protection under the Companies' Creditors Arrangement Act("CCAA"). This has the effect of staying all current tobacco litigation in Canada against ITCAN and other Group companies.
ITCAN's decision to file for protection under the CCAA follows the Quebec Court of Appeal judgment holding the industry jointly and severally liable for a maximum of CAD$13.6 billion, and the recent decision by one of the other Canadian tobacco companies, JTI-Macdonald, to seek, and subsequently obtain, CCAA protection. 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.
In addition, across Canada, other tobacco plaintiffs and provincial governments are collectively seeking significant damages which substantially exceed ITCAN's total assets. In seeking protection under the CCAA, ITCAN 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.
It will remain business as usual for ITCAN, its employees, customers and suppliers and during the CCAA process, ITCAN's management will continue to focus on growing its current cigarette and potentially reduced risk products business.
The Group will continue to consolidate the results of ITCAN, in line with IFRS 10 "Consolidated Financial Statements", and ITCAN's CCAA filing will not negatively affect the Group's adjusted net debt to adjusted EBITDA ratio.
The £2.3 billion of goodwill relating to ITCAN on the Group's balance sheet at 31 December 2018 will continue to be reviewed on a regular basis. Any future impairment charge would result in a non-cash charge to the income statement that will be treated as an adjusting item.
Since 2014 the Group has received no dividends from ITCAN and expects that this situation will continue whilst ITCAN remains under CCAA protection. Notwithstanding this, there will be no impact on the BAT Group's dividend payments or policy.