Our summaries of recent Canadian insolvency filings.
November 1, 2019
Einstein Exchange, a Vancouver, British Columbia-based cryptocurrency exchange with customer deposits equivalent to over $16.3 million, was placed in interim receivership on November 1 on application by the British Columbia Securities Commission. After receiving multiple complaints from members of the public claiming that they could not access their funds from Einstein, as well as complaints about improper use of funds and potential money laundering, the Commission issued an investigation order in May 2019. As part of the investigation, on October 31 the Commission demanded that Einstein, through its counsel, provide information about where its cryptocurrencies are stored. Two hours later, Einstein's counsel notified the Commission that it was no longer representing the company. The next day, the Commission visited Einstein's office and discovered that the elevator was locked for all floors. A phone call to the number listed on the company's website's stated that all its agents were unavailable. An interim receivership order was therefore immediately sought to preserve and protect the cryptocurrency and other assets of or held by the company. Grant Thornton was appointed interim receiver. Lawson Lundell is counsel for the applicant.
October 31, 2019
PrimeWest Mortgage Investment Corporation, a Saskatoon, Saskatchewan-based secondary lender, was placed in voluntary liquidation on October 31. Following the replacement of key personnel in 2016, the company conducted an in-depth review of, among other things, its mortgage portfolio, the results of which necessitated increases to its loan loss provisions and, ultimately, a restatement of its 2014 and 2015 financial statements. The company attempted to mitigate its mortgage portfolio losses in 2017 through a number of initiatives but was unable to return the company to profitability. Potential sales were also explored but no bona fide offers were received. The board and management therefore determined that a court-supervised liquidation was the best available option for winding up the corporation's affairs and returning any remaining capital to the shareholders. KPMG was appointed liquidator. McDougall Gauley is counsel for the company.
October 31, 2019
North American Fur Auction, an international fur auction house with a history dating back to 1670 and the historic Hudson's Bay Company, obtained protection under the CCAA on October 31. Based in Toronto, the company sells in excess of USD $200.0 million worth of fur products annually at the auctions it conducts. The company also lends funds to farmers/ranchers who use the loans to fund the development of minks. The farmers are then contractually bound to deliver those mink to NAFA for auction. The annual lending cycle ends around the end of November. Thereafter, the mink are harvested and turned into pelts for auction. Historically, the company has bridged the gap between lending and harvest with funds from a syndicate of lenders led by CIBC. The credit facilities typically range from $40.0 to $60.0 million, depending on the time of year. The syndicate made demand in the summer of 2019, however, and ultimately stopped funding in late September. Facing a looming liquidity crisis, the company negotiated an LOI with SAGA Furs, one of its principal competitors, to acquire certain of its loans. The proceeds from this transaction, along with DIP funding in the CCAA proceedings, will allow the company to harvest its current mink crop and thereafter reconsider its business operations. Deloitte was appointed monitor. KPMG is financial advisor to the company. Alvarez & Marsal is financial advisor to CIBC. Waygar Capital is providing a $5.0 million DIP loan. Counsel is Blaney McMurtry for the company, Miller Thomson for the monitor, TGF for BDC, Blakes for CIBC and Aird & Berlis for Waygar Capital.
October 29, 2019
Houston Oil & Gas, a Calgary, Alberta-based oil and gas company that focused on acquiring and rejuvenating legacy oil and gas assets, was placed in receivership on October 29 on application by the Orphan Well Association. Holding licenses to operate over 1,400 sites in Alberta, the company has been in discussions with the Alberta Energy Regulator (AER) for several months in relation to its financial difficulties. In early October, the company advised the AER that it had ceased operations and did not have the ability to shut-in all of its wells. In the interest of public safety, the OWA moved for a receiver to be appointed to ensure the wells are properly maintained and, where possible, sold and placed in the hands of responsible producers. The total abandonment and reclamation obligations relating to the company's assets are estimated to be over $81.5 million. Hardie & Kelly was appointed receiver. Miles Davison is counsel for the applicant.
October 29, 2019
DionyMed Brands (CSE: DYME), a Vancouver, British Columbia-based cannabis company, was placed in receivership on October 29 on application by GLAS Americas, owed, together with certain other lenders, approximately $24.8 million. The company generated its revenue primarily in the United States, selling a portfolio of wholly-owned and third-party brands to over 800 retail dispensaries in California, Oregon and Nevada, as well as providing a direct-to-consumer cannabis delivery service. Despite strong growth, the company was unprofitable; in the first 6 months of the year it recorded a negative operating cash flow of $17.2 million on $34.4 million of revenue. Efforts in recent months to raise additional capital were unsuccessful and the company's secured lenders were unwilling to provide additional funds without a court-supervised process geared to obtaining a permanent solution to the company's capital structure and indebtedness. FTI was appointed receiver. Counsel is Dentons for the applicant, Bennett Jones for the receiver, Stikeman Elliott for SP1 Credit Fund and Blakes for an ad hoc group of bondholders.
October 24, 2019
Cartise, a Montreal, Quebec-based distributor of women's fashion and apparel, was placed in receivership on October 24 on application by HSBC, owed approximately $1.3 million. Operating for over 40 years, the company sold to various boutiques and other retailers across Canada and the United States. EY was appointed receiver. Davies is counsel for the applicant.
October 24, 2019
54 Shepherd Road Inc. and 60 Shepherd Road Inc., owners of real property in Oakville, were placed in receivership on October 24 on application by FirstOntario Credit Union, owed approximately $2.6 million. The debtors were planning on developing a high-rise, mixed residential/commercial use project on the property but were unable to obtain construction financing, which, according to the debtors, was due to the structure of its existing financing from syndicated investors. With the debtors unwilling to accept the terms of a forbearance agreement that included bringing property tax and interest payments up-to-date, FirstOntario moved to enforce its security. msi Spergel (GRIP) was appointed receiver. Counsel is SimpsonWigle for the applicant and McCarthy Tétrault for the companies.
October 24, 2019
Le Bon Croissant, a Mississauga, Ontario-based manufacturer and distributor of baked goods, was placed in receivership on October 24 on application by CIBC, owed approximately $2.5 million. Producing croissants, breads, and frozen baked goods such as garlic bread for large private label brands such as Weston Group and Sobeys, the company was transferred to the bank's special loans group in early October. Soon after, the company's principal advised that he had decided to exit the business and that, absent an immediate cash injection, the company was not viable and could not continue to operate. He further advised that he would be leaving on October 19 for a two and a half week cruise in the Mediterranean and was prepared to "hand over the keys" to CIBC, if CIBC so desired. Demands were promptly made and BDO was appointed receiver. Minden Gross is counsel for the applicant.
October 22, 2019
DEL Equipment, a Newmarket, Ontario-based truck body builder and truck equipment upfitter, filed for protection under the CCAA on October 22. Operating nation-wide from six manufacturing and distribution locations, the company is currently facing a liquidity crisis and is in significant arrears to many of its suppliers. In June 2017, Gin-Cor Industries, a company that operates in the same field, acquired a 40% equity stake in DEL and assumed management control of the company. The majority of the anticipated business synergies failed to materialize, however, and in July 2018 the transaction was terminated and control of the business reverted back to DEL's previous sole shareholder. Despite this, the company's operational challenges have continued, and DEL is now more than $8.0 million in arrears to its supplier base, many of whom have begun to compress payment terms. Adding to this, the company has become embroiled in a payment dispute; a customer inadvertently remitted approximately $874.1 thousand to Gin-Cor instead of DEL and Gin-Cor is now refusing to return the funds. While under creditor protection, the company will seek to resolve the payment dispute. It also will attempt to complete a going-concern sale of the business or a restructuring transaction. MNP was appointed monitor. Counsel is Goodmans for the company and GSNH for the monitor.
October 21, 2019
ACCEL Energy, a Calgary, Alberta-based oil and gas company, filed an NOI on October 21. Deloitte is the proposal trustee.