King Street Restaurant Group, a Toronto, Ontario-based hospitality group, obtained protection under the CCAA on November 6. Prior to the onset of the COVID-19 pandemic, the Group operated eight restaurants under the following brands: Jacobs & Co, Buca, Bar Buca, La Banane, CXBO and Jamie’s Italian. Management has advised that the Companies’ financial difficulties and insolvency are attributable to two factors: (1) the significant impact of the COVID-19 pandemic and government restrictions on the Group’s business, contributing to a 98% decrease in year over year sales for the period from April to September 2020; and (2) the Jamie’s Italian locations at Yorkdale Mall and Square One Shopping Centre had insufficient revenues to make the restaurants profitable given their high fixed operating and start-up costs. The primary purpose of the CCAA proceedings is threefold: (1) to allow the Companies to operate their takeout and delivery business in order to maintain the value of their brands and preserve their various liquor licenses; (2) to stabilize the business operations to enable the Group to develop a strategy for the reopening of locations when possible; and (3) to develop and oversee an orderly restructuring of the business, including through the development and implementation of a SISP. MNP was appointed monitor. Counsel is Miller Thomson for the monitor, Gowling WLG (Canada) for the companies and Bennett Jones for secured lender and DIP lender Third Eye Capital.
Le Château Inc. (TSX:CTU), a Montreal, Quebec-based fashion retailer with a 60-year history and 121 stores across Canada, obtained protection under the CCAA on October 23, listing approximately $125.0 million in liabilities, including $21.2 million in deferred rent owing to landlords, and $81.0 million in assets. In the three-month period up until July 25, the company made $14.7 million in sales across its network of stores and online, down from $50 million in the same period last year. Since 2015, the company's network had already been reduced by almost 50% to adapt to the changing retail landscape and consumer shopping habits. The ongoing COVID-19 pandemic further impacted consumer demand for the company's holiday party and occasion wear, which represents the core of the company's business. Despite re-opening its stores, the company's brick-and-mortar operations continue to be negatively impacted by COVID-19 safety measures. While the company intends to remain fully operational as it liquidates its stores, eventual closures will mean the termination of approximately 1,400 jobs. During these CCAA proceedings, the company will receive interim financing from Wells Fargo Capital Finance Corp. Canada. PwC was appointed monitor. Counsel is Stikeman Elliott for the company, Norton Rose Fulbright for Wells Fargo, Osler for the monitor, McCarthy Tétreault for Gordon Brothers Finance and Fasken for Gordon Brothers and Hilco.
Sunniva Inc. (CNE: SNN), a Vancouver, British Columbia-based development stage business that has been developing facilities for the cultivation, processing, and distribution of raw cannabis flower and cannabis-based products — along with its subsidiaries — obtained protection under the CCAA on October 9. The company's financial distress is caused primarily by cost overruns and construction delays regarding its primary business asset, a leasehold interest in an under-construction cannabis cultivation facility in California. In November 2018, the company announced its strategic decision to focus corporate resources on developing the company's business in California and began liquidating its Canadian assets. The company and its subsidiaries intend to liquidate what remains of their Canadian assets and advance the business in California. On June 22, the British Columbia Securities Commission and Ontario Securities Commission each issued a cease trade order in respect of the company's shares. The company, which has unsecured debts in excess of $58.0 million, is currently seeking an extension of the stay period so that the relief will continue until November 27. Alvarez & Marsal was appointed monitor. Counsel is BLG for the companies and Cassels Brock for the monitor.
Mallinckrodt Canada ULC, the Canadian member of a broader group of companies that operates a global specialty pharmaceutical business (collectively, "Mallinckrodt"), was declared a foreign representative of itself, Mallinckrodt plc and Mallinckrodt Hospital Products Inc. under the CCAA on October 16. Mallinckrodt Canada ULC sells and distributes a single product in Canada — Methadose, which is the brand name used by Mallinckrodt for what is generically known as methadone. Enterprise-threatening litigation in respect of Mallinckrodt's production and sale of opioid medications has left the group no choice but to seek to restructure the claims against it to survive. In particular, Mallinckrodt Canada ULC is a named defendant in a class action proceeding in BC. EY was appointed information officer. Torys is counsel to Mallinckrodt Canada ULC.
Express Gold Refining Ltd., a Toronto, Ontario-based company in the gold refining business, obtained protection under the CCAA on October 15. This CCAA proceeding is not intended to be an operational restructuring. Rather, CCAA relief is required because of certain GST/HST commodity tax disputes, including CRA reassessments issued to the company which are in excess of $189.0 million, as well as CRA's refusal to pay the company's input tax credits ("ITC") since August 2018. CRA's diligence in approving and paying the company's claims for large amounts of ITCs is integral to the company's business. In November 2018, CRA expanded an ongoing audit to cover a 29-month period and announced that it would not only withhold any August 2018 ITCs, but also any future ITCs until the completion of the audit. It is unclear whether there are legal grounds to withhold payment of such off-audit ITCs. In May 2020, CRA issued a proposal stating its intention to reassess the company for the 29-month period, as it believed the company was engaged in a type of tax refund fraud called a "carousel scheme". Although the reassessments are currently being challenged in the Tax Court of Canada, they are still enforceable and the company cannot pay the $189 million penalty. Deloitte was appointed monitor. GSNH is general counsel and Baker & McKenzie is tax counsel for the company. Dentons is counsel to the monitor.
Glenogle Energy Inc. and Glenogle Energy Limited Partnership (collectively, "Glenogle"), a Calgary, Alberta-based oil and gas exploration and production company, obtained protection under the CCAA on September 8, listing approximately $72.6 million in liabilities, including $51.0 million to HSBC. Glenogle previously commenced NOI proceedings on May 14. Like other oil and gas businesses, the company has suffered due to the global collapse in commodity prices. More recently, global oil and natural gas markets and pricing have suffered precipitous declines as a result of extreme oversupply and an unprecedented drop in demand as a result of COVID-19. Currently, Glenogle requires the stability of the CCAA proceedings to carry out its SISP in a manner that will maximize value as part of its proposal. During these proceedings, HSBC will be providing up to $2.6 million in DIP financing. EY was appointed monitor. Counsel is Bennett Jones for the company, Fasken for the monitor, and Norton Rose Fulbright for HSBC
Creditloans Canada Financing Inc. (o/a "Progressa") and Creditloans Canada Capital Inc. (“Capital Inc.”) obtained protection under the CCAA on September 30, listing approximately $67.0 million in liabilities and $47.0 million in assets. Progressa is a Vancouver, British Columbia-based company primarily engaged in servicing consumer loans through an online medium to individuals unable to secure loans from traditional sources. Capital Inc. — which has no active business or operations — was incorporated for the sole purpose of issuing bonds, the proceeds of which are advanced to Progressa. As a result of the COVID-19 pandemic, Progressa experienced a significant reduction in originations of new loans that severely impacted its cash flow. The companies have sought a stay of proceedings under the CCAA in order to obtain interim financing and continue lending operations while working with its stakeholders to formulate a restructuring plan that will maximize asset value. During these CCAA proceedings, the companies will be receiving up to $2.5 million in DIP financing. BDO was appointed monitor. Counsel is McMillan for the companies, Fasken for the monitor, and Blakes for the proposed DIP lender.
Hematite Group, a tier 1 supplier of automotive component parts with facilities in Brantford and Guelph, Ontario, obtained protection under the CCAA on September 18, listing approximately $59.3 million in liabilities, including $14.5 million to TD and $2.6 million to BDC. The COVID-19 pandemic and the resulting government-mandated shutdowns have had a significant adverse impact on the company's financial position. From March to May, the company's gross sales were approximately 70% below expectations and it experienced a significant and unexpected operating loss. During these CCAA proceedings, Woodbridge Foam Corporation ("Woodbridge") will be providing up to $6.0 million in interim financing. KPMG was appointed monitor. Counsel is McCarthy Tétrault for the Group, Gowling WLG for the monitor, Bennett Jones for Woodbridge, and Dentons for TD.
PharmHouse Inc., a licensed cannabis producer with an operating facility in Staples, Ontario, obtained protection under the CCAA on September 15, listing approximately $170.9 million in liabilities and $187.7 million in assets. Since August, the company has relied on $1.2 million in funding from Canopy Rivers Corporation ("Rivers") to meet its immediate cash needs. In order to establish its operating facility, increase its cannabis production capabilities, and grow its business, the company has expended significant resources to date, including funds from equity and debt financing. As a result, the company has now exhausted its cash on hand, including its $90.0 million non-revolving credit facility. Absent urgent additional funding and a restructuring of its business, the company will face an immediate cessation of its operations. Although Rivers has advised that it is no longer willing to provide the company with funding on an unsecured basis, it will be providing DIP financing during the CCAA proceedings. EY was appointed monitor. Counsel is Bennett Jones for the company, BLG for the monitor, and Cassels Brock for Rivers.
Mountain Equipment Co-operative (MEC), a Vancouver, British Columbia-based member-owned and directed retail consumer co-operative specializing in outdoor activity equipment and clothing, obtained protection under the CCAA on September 14, listing approximately $229.6 million in liabilities and $389.0 million in assets. MEC — which is a key Canadian retail partner with global outdoor brands including Patagonia, the North Face, Arc'teryx, Birkenstock, and Blundstone — currently operates 22 retail locations across Canada. While there was a considerable increase in online sales during March to September, MEC experienced a reduction in sales of $90 million compared to last year, and all MEC stores were closed as of March. The co-op is currently in the midst of a liquidity crisis, primarily due to difficult retail conditions which were exacerbated by the COVID-19 pandemic. As such, it was necessary for MEC to refinance, downsize operations, conduct a review of strategic alternatives, or conduct a potential sale of the MEC business. MEC's board of directors has unanimously approved a deal in which Kingswood Capital Management ("Kingswood"), a Los Angeles-based private investment firm, will acquire MEC's assets. MEC's transition from a co-operative structure to a subsidiary of Kingswood is required to ensure a stable future for the business. Alvarez & Marsal was appointed monitor. Counsel is Norton Rose Fulbright for MEC, Cassels Brock for the monitor, and Fasken for Kingswood.