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Japan Tobacco unit seeks creditor protection following Canada court ruling

Japan Tobacco unit seeks creditor protection following Canada court ruling

Japan Tobacco Inc.'s Canadian subsidiary JTI-Macdonald Corp. sought protection from its creditors after a Canadian court ordered the cigarette maker and the Canadian units of British American Tobacco PLC and Philip Morris International Inc. to pay C$15.6 billion in damages.

The Ontario Superior Court March 4 dismissed an appeal made by the companies against the court's decision of holding them liable in two class-action lawsuits filed by people who developed lung and respiratory diseases after smoking cigarettes.

JTI-Macdonald was found liable for C$1.77 billion and is being asked to pay C$145 million as an initial deposit.

The company said the amount of its liability exceeds its capacity to pay and sought protection from its creditors under Canada's Companies' Creditors Arrangement Act, or CCAA, to allow it to continue its business operations.

The Ontario Superior Court on March 8 granted JTI-Macdonald's CCAA application and extended protection. JTI-Macdonald now intends to proceed with an appeal to the Supreme Court of Canada.

Analysts earlier said the tobacco manufacturers involved could face bankruptcy following the court judgment.

Meanwhile, British American Tobacco earlier said that it expects to book a charge of £436 million over the ruling. Philip Morris cut its EPS forecast for fiscal 2019 as a result of litigation charges in connection to the lawsuit.

JTI-Macdonald is the only Japan Tobacco unit affected in the proceedings, according to the release.