Our summaries of recent Canadian insolvency filings.
October 15, 2019
3070 Ellesmere Developments, an Ontario corporation that owns a vacant parcel of land municipally known as 3070 Ellesmere Road, Scarborough, Ontario, was placed in receivership on September 13 on application by 2478888 Ontario Inc., owed approximately $6.6 million. On August 20, the company filed an NOI and subsequently served materials seeking, among other things: the appointment of a Chief Restructuring Advisor, the appointment of a sales process advisor and the approval of a stalking horse purchase agreement. The lender opposed this motion on the basis that it was in direct contravention of its agreement with the debtor. It also took issue with the anticipated costs of the debtor-driven proceedings, arguing that a Chief Restructuring Advisor, a sales process advisor and a proposal trustee are not all required to conduct a sale process for a vacant parcel of land that a receiver alone could run at a significantly lower cost in a substantially similar timeline. RSM was appointed receiver. Counsel is TGF for the applicant and Cassels Brock for the company.
October 7, 2019
Forever XXI ULC, the Canadian operating subsidiary of US-based retailer Forever 21, obtained protection under the CCAA on September 29. The filing occurred on the same day the company's parent filed for Chapter 11 bankruptcy protection in the US. In Canada, the company operates 44 retail stores in malls across the country, selling apparel, accessories and other products under the Forever 21 and other related brands. While the company's initial expansion into the Canadian market in 2001 was promising, it has struggled to maintain profitability, and the vast majority of its stores are unprofitable. As part of its global restructuring plan, Forever 21 has determined that it will exit substantially all of its international markets, including Canada. Following a pre-filing bid solicitation process, the company selected Gordon Brothers and Merchant Retail Solutions to jointly conduct an orderly liquidation of the Canadian inventory and other assets. PwC was appointed monitor. Alvarez & Marsal is the company's financial advisor. Counsel is Osler for the company, Goodmans for the monitor, Norton Rose Fulbright for lender J.P. Morgan Chase, Cassels Brock for Gordon Brothers, Torys for Cadillac Fairview and Gardiner Roberts for Oxford Properties.
October 4, 2019
Applefest Lodge, a retirement residence in Brighton, Ontario, was placed in receivership on October 4 on application by Pace Savings & Credit Union, owed approximately $6.4 million. Originally opened in 1984, the residence was expanded in 2010 by opening a new wing with an additional 31 suites, resulting in a total of 67 suites. The expansion, however, created financial difficulty for the company due to construction delays, expensive financing and low occupancy and Stephen Bardo, the residence's sole officer and director, turned to Bill Dillane, a personal friend and private investor for funds to cover the shortfall. In July 2019, Bardo passed away. He had no will, and there was no mechanism in the residence's articles of incorporation to replace him as officer or director. With no other signing officer for the company, Dillane continued to fund expenses personally and then reimburse himself using pre-signed cheques provided by Bardo prior to his death. While an essential arrangement, it is not sustainable, and Pace therefore sought the appointment of a receiver who could borrow money while managing and preparing the residence for a sale. Grant Thornton was appointed receiver. Counsel is Harrison Pensa for the applicant and Aird & Berlis for the receiver.
October 2, 2019
Bellatrix Exploration (TSX: BXE), a Calgary, Alberta-based oil and gas company, obtained protection under the CCAA on October 2. Facing declining revenues and increasing liquidity challenges as a result of prolonged difficult market conditions, the company made several attempts to improve its capital structure. In June 2019, the company completed a recapitalization transaction pursuant to a CBCA plan of arrangement that, among other things, reduced its debt obligations by approximately $110.0 million. Despite this, commodity prices have slid lower in the last several months, resulting in a near term liquidity crisis. In light of these challenges, the company sought creditor protection to provide stability for the business, additional time to pursue a sale and investment solicitation process and time to advance potential restructuring alternatives. The CCAA proceedings will also give the company access to much needed interim financing. PwC is the monitor. Counsel is Goodmans for the company and BLG for the monitor.
September 27, 2019
B&W Heat Treating Canada, a Kitchener, Ontario-based supplier of heat-treating services for customers with aluminum, steel, alloy or metal parts that require heat treatment, was placed in receivership on September 27 on application by Cerberus Business Financial, owed together with certain other lenders approximately US $3.0 million. Until several years ago, the largest and most profitable part of the company's business was processing engine blocks for its main customer, which represented approximately 37% of the company's revenue. In 2015/2016, the customer transferred its business to Mexico, away from the company. As a result of the loss of business, the company has suffered operating losses for several years. Despite attempts to scale back costs, the company was unable to return to profitability and made the decision to sell the business and its assets. A sale process has led to a proposed transaction with Hilco, which will be completed through the receivership. Farber was appointed receiver. Counsel is McMillan for the applicant and Chaitons for the company.
September 27, 2019
FTI Holdings, a London, Ontario-based trucking company, along with certain related companies, filed for bankruptcy on September 27, listing $18.9 million in liabilities, including $15.5 million to U.S. Bank and $1.1 million to HCI Equity Partners, a Washington, D.C.-based private equity firm which acquired the company in 2014 with a plan to merge it with another of its portfolio companies, Denver, Colorado-based HVH Transportation. However in August 2019, for various reasons both companies shut down. Grant Thornton was appointed bankruptcy trustee of the Canadian companies.
September 25, 2019
Venturi Logging, a Merville, British Columbia-based logging company, was placed in receivership on September 25 on application by CWB, owed approximately $603.7 thousand. Grant Thornton is the receiver. Owen Bird is counsel for the applicant.
September 19, 2019
Curative Cannabis, an early stage cannabis cultivation company that is in the process of building a facility in Chatham, Ontario, was placed in receivership on September 19 on application by Auxly Cannabis Group, owed approximately $16.2 million. The company's facility is approximately 90% complete and it has submitted its application for a cultivation license. The company's loan from Auxly, which was used to finance the acquisition of the Chatham land and the construction of the facility, matured in August 2019 and the company has been unable to refinance the loan or otherwise put forward a proposal acceptable to Auxly. Farber was appointed receiver. Counsel is Bennett Jones for the applicant and Siskinds for the company.
September 19, 2019
Purdue Pharma LP, a Stamford, Connecticut-based pharmaceutical company, obtained a Canadian recognition order of its US Chapter 11 proceedings on September 19. The company's most prominent product is its opioid pain medication, OxyContin. The company has been named in more than 2,600 lawsuits filed throughout the US state and federal court systems. The lawsuits allege that the company acted improperly in the marketing and sale of OxyContin and is responsible for fueling an opioid addiction crisis in the United States. In Canada, Purdue is also subject to over 10 class-action lawsuits. The company has sought bankruptcy protection in an attempt to find a global resolution of the existing claims against it. The company is proposing a settlement that involves, among other things, a $3.0 billion contribution from the company's shareholders and the transfer of the company's business and assets into a trust for the benefit of claimants and the US public. EY was appointed information officer. Canadian counsel is Stikeman Elliott for Purdue, Torys for the information officer, BLG for certain affiliated Purdue Canadian entities and Paliare Roland for the Sackler families.
September 18, 2019
Black Angus Group, a Thornbury, Ontario-based group of companies operating a butcher shop business, was placed in receivership on September 18 on application by Laurentian Bank, owed approximately $1.2 million. Founded in 2005, the company operated online and through three retail locations, selling traditional wild game meats such as boar, bison and venison, as well as more unique meats such as kangaroo and crocodile. Operating under a forbearance agreement since August 2018, the company was unable to refinance its debt and, in recent months, made minimal deposits to its Laurentian bank accounts, leading Laurentian to believe that the company was depositing its accounts receivable with another financial institution. RSM was appointed receiver. Counsel is TGF for the applicant.