Our summaries of recent Canadian insolvency filings.
November 30, 2020
Maple Medi Pharma Inc. et al. (collectively, the "Debtors"), each of which owns or operates a pharmacy or owns the real estate on which a pharmacy is located, were placed in receivership on November 25 on application by 1951584 Ontario Inc. and CWB Maxium Financial Inc. ("CWB"), owed approximately $25.9 million on 19 promissory notes issued between 2015 and 2019. John Gerges, who is either a director, officer, or sole/significant shareholder of 19 of the 21 Debtors, is also a guarantor of a majority of the Debtors' promissory notes with CWB. In January 2020, CWB learned that Gerges had been charged with possession of a Schedule I substance. News reports indicated that the York Regional Police had recovered more than $500.0 thousand in opioid pills and an illegal handgun during their investigation of an alleged opioid trafficking ring. Since the criminal charges were laid against Gerges, CWB also became aware that certain of the Debtors were operating without any liability insurance. CWB's efforts to work with the Debtors with a view to consensually resolving the defaults have ultimately been unsuccessful and CWB has lost confidence in the Debtors' management. msi Spergel (GRIP) was appointed receiver. Counsel is Miller Thomson for the applicants, Weisz Fell Kour for certain of the Debtors, DLA Piper for certain of the other Debtors, and GSNH for the receiver.
November 23, 2020
Nabis Holdings Inc. (CSE:NAB), a Canadian investment issuer that invests in high quality cash flowing assets across multiple industries, including real property and all aspects of the U.S. and international cannabis sector, filed a proposal on November 23 after entering into a support agreement with certain holders of the company's outstanding unsecured convertible debentures in the amount of $35.0 million. Pursuant to this support agreement, the holders have agreed to support a recapitalization plan for the company which will be implemented pursuant to a BIA proposal. Previously, the company announced that Odyssey Trust Company commenced legal action against the company alleging a breach of the terms of the debentures as a result of a missed interest payment. In light of the company's liquidity constraints, the company believes that the recapitalization, including the proposal and support agreement, are in the best interest of the company and its stakeholders. KSV is the proposal trustee. Counsel is McMillan for the company, Bennett Jones for the debenture holders and Chaitons for the proposal trustee.
November 19, 2020
Globeways Canada Inc. ("Globeways"), a Mississauga, Ontario-based company that carries on business as a processor and wholesaler of pulse crops, was placed in receivership, along with its subsidiaries, on November 19 on application by TD, owed approximately $13.0 million (CAD) and $84.1 thousand (USD). By September 2019, Globeways was in default of a number of covenants in its banking arrangements with TD, including substantial defaults in financial reporting and borrowings that exceeded the authorized amount. Partly in order to address liquidity concerns, the companies sold three of their formerly-owned processing pants in Saskatchewan to an unrelated party. However, following the closing of the sale, the companies remained in default of their covenants with TD. Furthermore, since the companies' operations are regulated and subject to licenses issued by the Canadian Grain Commission, they must post security and maintain adequate claims insurance for their obligation to farmers. However, due to significant claims advanced by certain unpaid farmers, the insurer of such policies has delivered notices of cancellation to the companies. Without adequate insurance and security to satisfy the statutory requirements, the companies cannot continue operations. BDO was appointed receiver. Counsel is Aird & Berlis for the applicant, MLT Aikins for the receiver, and Simmons da Silva for the companies.
November 19, 2020
Fossil Water Corporation, a Calgary, Alberta-based company that provides water treatment consulting services and supplies custom-built modular water treatment systems primarily for the oil and gas industry, was adjudged bankrupt on November 19 on application by RBC, owed approximately $585.5 thousand. The company has ceased to meet its liabilities as they become due as the indebtedness to RBC remains entirely unpaid and there appear to be multiple outstanding judgments registered against the company. Grant Thornton is the bankruptcy trustee. McMillan is counsel to the applicant.
November 13, 2020
Nauss Pluming & Heating Inc., a Sudbury, Ontario-based plumbing company, was placed in receivership on November 13 on application by CIBC, owed approximately $1.1 million. Last November, the parties entered into a settlement agreement pursuant to which the company consented to the appointment of MNP as receiver unless it fully repaid its indebtedness by January 10, 2020. The company failed to do so and counsel for the parties attended a hearing in January to appoint the receiver. However, the application was adjourned to permit a motion to be brought to enforce the alleged settlement action. However, various scheduling conflicts and COVID-19 shutdown measures had resulted in the motion being adjourned until further notice. MNP was appointed receiver. Gowling WLG is counsel to the applicant.
Trigger Wholesale Inc., The En Carde Group Inc., Mark Gdak, Jaimee Lynn Gdak and Jaimak Real Properties Inc.
November 9, 2020
Trigger Wholesale Inc., The En Carde Group Inc., Mark Gdak, Jaimee Lynn Gdak and Jaimak Real Properties Inc. were placed into receivership on October 22, 2020, on application by ClearFlow Commercial Finance, owed approximately $48.6 million. Trigger is a Waterloo, Ontario-based firearms and ammunition wholesaler. The application was precipitated by allegations of a long-standing, organized pattern of fraud on the part of Trigger and Mark Gdak that recently came to the attention of ClearFlow. The alleged fraud consisted of, among other things, allegations of hundreds of falsified invoices as evidence of accounts receivable that did not exist, falsified purchase orders, a forged transfer of real property, fake email addresses of executives at Canadian Tire and Home Hardware, verbal and email impersonations of executives employed by Canadian Tire and Home Hardware, and forged cheques made to look like payments by Canadian Tire and Home Hardware to Trigger for the alleged purchase of firearms. ClearFlow is not aware of the extent of its loss but estimates that it is in the millions and possibly tens of millions of dollars. Grant Thornton was appointed receiver. Counsel is BLG for the receiver, Torkin Manes for the applicant and Lerners for the debtors.
November 9, 2020
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.
November 4, 2020
Exponential Group, a group of early stage companies in the business of investing in other other startup companies primarily in the financial technology sector, were placed in receivership on November 4 on application by 2444467 Ontario Inc. ("JT HoldCo") and James Town. From the Group's inception, JT HoldCo has provided the substantial majority of the Group's operational funding. ExV Inc., one of the companies in the Group, owes approximately $3.1 million to JT HoldCo. As the principals of the Group are currently unable to agree on anything regarding the management and operations of the business, they require the assistance of a receiver. MNP has been appointed receiver. Counsel is Paliare Roland for the applicants, Chaitons for the receiver and Bennett Jones for James Wallace McCreary.
November 2, 2020
Curexe Inc., a Toronto, Ontario-based company that provides online payment processing services to merchants operating in a variety of sectors and industries, was placed in liquidation on November 2 on application by SmartPay Inc. ("SmartPay"), which owns all of the issued and outstanding shares of the company. Pursuant to a Memorandum of Understanding, the company pays SmartPay the net fees received from its clients in return for SmartPay providing all of the "back room" services required for the company to provide services to its clients. Around June, the company's deposit accounts with Luminus Financial Services & Savings Credit Union Limited ("Luminus") were inexplicably frozen and, as a result, the company has been unable to carry on business in the ordinary course. SmartPay believes it is in the best interests of the company's clients to liquidate the company so that the funds held by Luminus can be distributed in an orderly fashion. MNP was appointed liquidator. Gowling WLG is counsel to the applicant.
Centre City Real Estate Inc. (o/a Re/Max Centre City Realty Inc.) ("Centre City"), a Re/Max franchisee operating in Prince George, BC, and It'll Be Good Hold Co Inc., a holding company, were placed in receivership on October 30 on application by TD, owed approximately $1.2 million. TD, which has only received one payment against the companies' indebtedness since January 2020, entered into a forbearance agreement under which the companies agreed to repay their indebtedness before June. However, the companies failed to do so and consequently defaulted under the forbearance agreement. Furthermore, the companies could not secure any refinancing or investment during the forbearance period and have similarly been unable to do so since the expiry of its term. In October, Centre City's landlord issued a notice of termination of their lease and claimed for the arrears and the present value of all future rent payments over the unexpired portion of the term. MNP was appointed receiver. Owen Bird is counsel to the applicant.