Our summaries of recent Canadian insolvency filings.
June 22, 2020
Modasuite Inc. a Montreal, Quebec-based business doing business as Frank and Oak, filed an NOI on June 22, 2020, listing approximately $19.0 million in liabilities, including approximately 6.0 million to Desjardins. Founded in 2012, the company operates primarily as an online clothing retailer, though it also operates 22 retail locations across Canada. While under creditor protection, the company will run a sales and investment solicitation process, led by Stifel Nicolaus Canada Inc. KPMG is the proposal trustee. Counsel is Osler for the company, Norton Rose Fulbright for the proposal trustee and McCarthy Tétrault for Desjardins.
June 19, 2020
Northern Pulp Nova Scotia Corporation, which owns a pulp mill in Abercrombie, Nova Scotia, along with its affiliates (collectively, the "Petitioners"), filed for protection under the CCAA on June 19 after the Petitioners were forced to cease business operations of their mill on January 31 and lay off over 300 employees. The mill closed following the Nova Scotia Premier's refusal to extend the life of the company's effluent treatment plant in Boat Harbour. As a consequence of the mill's closure and associated operational issues, the Petitioners face immediate and multiple challenges to their continued viability and project they will run out of cash in late July. Without CCAA protection, the Petitioners, which currently owe approximately $84.9 million to the Province of Nova Scotia, will be unable to transition the mill and their operations into a safe state of hibernation and preservation. EY was appointed monitor. Counsel is McCarthy Tétrault for the Petitioners and Stewart McKelvey for the Province of Nova Scotia.
June 19, 2020
Skillsoft Canada, as the foreign representative of Skillsoft, a US educational technology company which provides cloud-based learning solutions, had its Chapter 11 proceedings recognized in Canada under the CCAA on June 19. The primary purpose of the Chapter 11 proceedings is to implement a pre-negotiated, consensual restructuring that will reduce the company's existing balance sheet liabilities from $2.1 billion to $585.0 million. In recent years, the company has faced several challenges that have adversely impacted the operating performance of its business, including customer attrition resulting from steep market competition as well as the company's difficulty adapting its business model to address market shifts. In 2019, the company launched a successful transformation plan aimed at stabilizing the business. Despite increased order intake, customer renewal rates and new business, however, the company remains over-levered, with looming debt maturities in 2020 and 2021. Richter was appointed information officer. Counsel is Stikeman Elliott for the company, Fasken for the information officer, Osler for an ad hoc group of first lien and second lien lenders, and Goodmans for an ad hoc group of first lien lenders.
June 18, 2020
Samboro Luggages, a Richmond Hill, Ontario-based distributor and wholesaler of branded travel luggage, was placed in receivership on June 18 on application by HSBC Bank Canada, owed approximately $317.3 thousand (USD) and $2.0 million (CAD). The company assigned itself into bankruptcy on June 9, which constituted an event of default under the company's loan documents with the bank. Farber is the receiver and bankruptcy trustee. TGF is counsel to the applicant.
June 17, 2020
AllSaints USA, a subsidiary of AllSaints, a global contemporary fashion brand headquartered in London, England, had its UK restructuring proceedings recognized in Canada under the CCAA on June 17. The company attributes its financial troubles to the COVID-19 pandemic, which has had a significant impact on the company's immediate liquidity position. In complying with the global COVID-19 restrictions, AllSaints closed most of its international locations by the middle of March, including all six of the company's Canadian stores. As a result of the company's liquidity challenges and financial difficulties, it has not paid rent under its Canadian leases from March to June and owes approximately $526.5 thousand in rent obligations to its Canadian landlords. Without a restructuring of existing liabilities, the company's business will not be sustainable. PwC was appointed information officer. Counsel is Blakes for the company and Cassels for the information officer.
June 16, 2020
Vert Infrastructure Ltd. (CSE:VVV), a holding company which provides funding, infrastructure, and branding to affiliated licenced cannabis and hemp growers and extractors in the US, was placed in receivership on June 16 on application by KW Capital Partners Limited, owed approximately $5.2 million as the agent on behalf of the company's secured lenders. It is alleged that the company transferred money to its most significant subsidiary, Elite Ventures Group LLP, for the purposes of developing certain real property interests in Nevada, US. Currently, the applicant is seeking the appointment of a receiver to investigate whether the transfer of funds from Elite to other parties for no consideration constitutes a transaction at undervalue. The company's most recent interim financial statements indicate that it has a cash balance of under $2,000 and a shareholders' deficit of more than $22.0 million. KSV Advisory was appointed receiver. Garfinkle Biderman is counsel to the applicant.
June 11, 2020
Cequence Energy Ltd. (TSX:CQE), a Calgary, Alberta-based company engaged in the acquisition, exploration, development, and production of petroleum and natural gas reserves in Western Canada — along with its subsidiaries — obtained protection under the CCAA on June 11, listing approximately $112.7 million in liabilities. The companies, which reported operating losses for the last five years, have a working capital deficiency of $10.3 million and a secured term loan outstanding of $50.0 million. They are currently in the midst of a liquidity crisis, primarily due to low commodity prices, declining production volumes, onerous contractual obligations, and significant debt. As a result of these factors and based on current cash balances, the companies will be unable to fund their financial commitments in 2020 absent a restructuring of their affairs. During the CCAA proceedings, the companies will be seeking up to $7.0 million in DIP financing from its second lien lenders. EY was appointed monitor. Counsel is Norton Rose Fulbright for the companies, BDP Law for CIBC, BLG for the second lien lenders, and McCarthy Tétrault for EY.
Stableview Asset Management Inc., Stableview Yield & Growth Fund, Stableview Progressive Growth Fund, Stableview Insight Fund LP and Stableview Insight Fund GP Inc. (collectively, the “Stableview Group”)
June 9, 2020
Stableview Asset Management Inc., Stableview Yield & Growth Fund, Stableview Progressive Growth Fund, Stableview Insight Fund LP and Stableview Insight Fund GP Inc. (collectively, the “Stableview Group”), a Toronto, Ontario-based financial asset management firm, was placed into receivership on June 9 on application by the Ontario Securities Commission (the "OSC"). In January 2019, an OSC compliance review found that the Stableview Group — along with its sole director and officer — engaged in conduct that breached the Securities Act in a number of fundamental ways, including causing the funds to become significantly over-concentrated in investments of a penny stock named Clarocity Corp. Although Clarocity's financial circumstances deteriorated during the period the Stableview Group invested in the company, Stableview continued to direct investments into Clarocity. The investments subsequently caused the funds to breach their investment restrictions. As a result of these breaches, in November 2019, the OSC imposed conditions on the Stableview Group's registrations with the OSC, including trading and financial restrictions as well as prohibitions on redemptions without approval. Since those steps were taken, however, the OSC alleges that the Stableview Group and its sole director and officer continue to engage in misconduct. A receivership proceeding was initiated in an attempt to protect investors' interests while investigation and enforcement efforts continue. Grant Thornton was appointed receiver and manager. Counsel is Chaitons for the receiver and Wright Temelini for the Stableview Group.
June 8, 2020
Coalision Inc., a Montreal, Quebec-based designer and developer of lifestyle and performance apparel, including activewear brand Lolë, filed an NOI on May 26, listing approximately $17.2 million in liabilities to CIBC and $15.3 million to Simon Coalision Investment Inc. Founded in 1989, the company recorded significant losses for the last several years, which have primarily been caused by a general downturn in the global retail clothing market; competition from other established and emerging clothing retailers; shifts in consumer habits; and excess inventory. The COVID-19 pandemic and closure of all the Lolë stores had a further detrimental impact on the company's business and revenues. Deloitte is the proposal trustee. Counsel is McCarthy Tétrault for the company and Fishman Flanz Meland Paquin for CIBC.
June 5, 2020
C. & C. Wood Products Ltd., a manufacturer of wood products with mill facilities in Cranbrook and Quesnel, British Columbia, along with its subsidiary, Westside Logging Ltd., were placed in receivership on June 5 on application by Callidus Capital, owed approximately $91.0 million. Over the last two years, the companies sustained significant operating losses. Although the companies previously attempted to implement various restructuring initiatives and turnarounds, none of these resulted in a cash flow positive operation or a going concern sale of the companies. As a result, the companies' two facilities have now been shut down. PwC was appointed receiver. Lawson Lundell is counsel to the applicant.