U.S. Court Formally Approves Imperial Tobacco Canada Restructuring Plan Involving US$23.6 Billion Settlement

Key Points

• Court Ruling: U.S. Bankruptcy Court approved and recognized Imperial Tobacco Canada’s restructuring plan under Chapter 15 of the U.S. Bankruptcy Code.
• Settlement Amount: The three tobacco companies will pay CA$32.5 billion (US$23.6 billion), including CA$12.5 billion (US$9.1 billion) in upfront cash, with the remainder from net after-tax income over the next 20 years.
• Background: In 2019, Imperial Tobacco Canada, JTI-Macdonald, and Rothman Benson & Hedges faced claims totaling CA$1 trillion and entered insolvency proceedings.
• International Dimension: While Imperial Tobacco Canada does not sell products overseas, its supply chain and inventory involve the U.S., along with legacy pension liabilities.

2Firsts, August 28, 2025 —— According to Law360 on August 26, U.S. Bankruptcy Judge John P. Mastando III of the Southern District of New York formally approved and recognized the restructuring plan of Imperial Tobacco Canada Ltd., thereby confirming the legal effect in the U.S. of its participation in the CA$32.5 billion (US$23.6 billion) tobacco litigation settlement.

The agreement is regarded as one of the largest restructurings in Canadian history. Imperial Tobacco Canada’s U.S. counsel, Jennifer Feldsher, stated in court: “This is one of the largest, if not the largest, restructurings in Canadian history.”

Imperial Tobacco Canada is one of the three largest tobacco distributors in Canada and a subsidiary of British American Tobacco (BAT). In 2019, the company, along with JTI-Macdonald Corp. and Rothman, Benson & Hedges Inc., entered Canadian insolvency proceedings in response to CA$1 trillion (US$725.6 billion) in health-related tobacco claims.

• JTI-Macdonald Corp. is the Canadian subsidiary of Japan Tobacco International (JTI).
• Rothmans, Benson & Hedges Inc. is the Canadian arm of Philip Morris International (PMI).
• Imperial Tobacco Canada Ltd. is the Canadian subsidiary of British American Tobacco (BAT).

After years of mediation—delayed significantly by the COVID-19 pandemic—the parties reached a settlement in 2024. Under the terms, the three companies will pay into a CA$32.5 billion (US$23.6 billion) fund to compensate class action claimants and reimburse Canadian provincial governments for healthcare costs related to tobacco use.

The agreement stipulates that nearly CA$12.5 billion (US$9.1 billion) will be paid upfront in cash, while the remainder will be drawn from the majority of the companies’ net after-tax income over the next 20 years.

Feldsher noted that this settlement is the largest of its kind since the 1998 Master Settlement Agreement in the U.S., when American tobacco companies agreed to pay more than US$200 billion.

Imperial Tobacco Canada filed its restructuring plan in October 2024, which was approved by a Canadian court in March 2025. Although Imperial Tobacco Canada does not sell tobacco outside of Canada, its supply chain passes through the U.S., where it also stores inventory. The company also resolved legacy pension liabilities stemming from acquisitions of U.S. companies.

Subsequently, Imperial Tobacco Canada sought U.S. recognition of the plan. Judge Mastando granted the request, recognized the Canadian court-appointed plan administrator, and issued an order barring unauthorized solicitation of claims in the case.