Has the law changed in Canada based on the September, 2017 decision of Justice Myers of the Ontario Superior Court of Justice in the Toys ”R” Us (Canada) Ltd. case? Section 11.2 of the Canadian Companies’ Creditors Arrangement Act (“CCAA”) allows the Court to create a charge to secure a DIP financing. However, that section provides that “the security or charge may not secure an obligation that exists before the order is made”. This had been interpreted in prior cases as a prohibition on using DIP proceeds to pay pre-filing secured loans. The Court would, however, permit post-filing receipts to be swept in favour of the pre-filing secured loan, so the wisdom in Canada was that a “creeping” DIP payment structure was fine, whereas using DIP proceeds to repay pre-filing secured debt was not permitted. Justice Myers focused on whether the DIP charge (in favour of the same group of lenders who had provided pre-filing financing) was “being used to improve the security of the pre-filing ABL lenders or to fill any gaps in their security coverage”. He concluded that it was not, so permitted the DIP proceeds to be used to repay the pre-filing secured loan in full. We think the Court was correct in focusing on whether priorities were being re-ordered, since it is our view that this is what the above-noted restriction in Section 11.2 of the CCAA was intended to prevent.