Behind the scenes of a 2025 Canadian Law Awards-winning corporate transformation
In the aftermath of one of Canada’s most complex corporate transformations, Michael Barrett still sounds like he’s catching his breath. “You have the largest and second-largest Canadian bond offerings occurring more or less at the same time. We've never seen anything like it,” he says, summing up the TC Energy spinoff that earned the title of Capital Markets Deal of the Year at the Canadian Law Awards.
Barrett, a partner at Blake, Cassels & Graydon LLP, was part of the core legal team that orchestrated the C$7.9 billion notes offering tied to TC Energy’s separation of its liquids pipeline business into South Bow Corporation. More than just a deal, this was a case study in transactional intensity, coordination and legal choreography.
He describes the role he and fellow partner Jeff Bakker played as quarterbacks, not only handling securities work but ensuring a unified approach across a sprawling network of legal experts. “There were a number of different work streams that all had to really function effectively together,” Barrett says. “We were all at Blakes… singing from the same songbook.”
The numbers tell part of the story: C$14.5 billion in total transaction value, C$7.9 billion in debt issued, nine series of senior and subordinated notes, and a spinoff that required simultaneous listings on both the TSX and NYSE. But numbers can’t fully capture the transactional tightrope act, particularly when executed under a tax-deferred “butterfly” structure.
“This is one of the largest spinoff transactions in Canadian history,” Barrett explains. “It had to be done in a tax-deferred way in Canada and the US. So [South Bow] could not provide the guarantee [for the bond issuance] from a tax perspective… it would ruin the… butterfly rules.”
That guarantee had to be delayed – meticulously timed to meet legal and tax constraints. “If we were just operating from a securities perspective, we wouldn’t be able to effectively execute this transaction,” he adds.
The legal innovations were significant, even by Bay Street standards. Notes were offered by two operating entities – one Canadian, one American – with cross-guarantees layered in. There was a “midco” sitting above both, and eventually South Bow itself had to come in with guarantees. The structuring resembled a legal Rubik’s Cube, each twist constrained by tax law, cross-border regulations, and capital markets requirements.
Complicating the spinoff further was the simultaneous refinancing of TC Energy’s Coastal GasLink Pipeline, a deal worth C$7.15 billion. “We were trying to balance this with Coastal GasLink… [and] the regular operation of a very complex business,” Barrett says. “It's just putting all these things together and making sure that everything worked in a very cohesive, coordinated manner.”
Coordination, it turns out, wasn’t limited to law firms. Barrett describes an extraordinary meeting involving over 40 participants – lawyers, stock exchange officials, and clearinghouses from both sides of the border – to figure out how the new South Bow shares could trade effectively. “We needed to create different markets so people could trade an entitlement to receive shares before the spinout occurred,” he says. “This doesn’t occur very often… particularly not when you have both TSX and NYSE-listed entities.”
What distinguished South Bow from TC Energy – and in many ways justified the separation – was the divergent nature of the businesses. “South Bow… it’s a very utility-like, very steady, very dependable business,” he says. “On the other hand… TC’s power and renewables are a much more high growth business.” The separation, according to Barrett, enabled investors to choose between steady returns or growth-oriented exposure, and allowed each business to pursue capital strategies aligned with their distinct risk profiles.
From a legal execution standpoint, Barrett believes the success of the deal hinged on proactive planning. “We had a Gantt chart that was about six pages long with 40 key transaction items,” he says. “We were trying to look two steps ahead and see what potential challenges could occur… and address them now, as opposed to respond to them later.”
Barrett also credits the sophistication of TC Energy’s in-house legal department. “The depth and strength of TC really sets them apart from the vast majority of Canadian companies,” he says. “We were able to… work on this transaction as partners, which is super rewarding.”
For Barrett, it’s more than just a career highlight – it’s a career-defining experience. “I was recently talking with one of the most senior practitioners in our group,” he shares. “He said… appreciate the moment, appreciate the significance of this deal.” Barrett is doing just that. “This is one of the transactions that when I look back 10, 20, 30 years… [will be] one of those transactions that I am most proud of.”
