July 13, 2020
DAVIDsTEA (NASDAQ:DTEA), a Montreal, Quebec-based leading Canadian speciality tea and tea accessory retailer, obtained protection under the CCAA and had its Chapter 15 bankruptcy recognized in Canada on July 8. Currently, the company owes approximately $21.0 million for various trade and other payables, $7.2 million to its Canadian landlords, and $6.7 million in gift card commitments. Over the last three years, the company has suffered a $28.0 million decline in sales and incurred a combined net loss of $93.0 million. Several factors contributed to the company's financial difficulties, including the US stores under-performing, the minimum wage increase across several Canadian jurisdictions where the company operates, and the high cost of rent for the company's stores. Although the company implemented a series of operational turnaround initiatives, they were insufficient to offset ongoing decline in sales suffered over the last several months. Without the ordinary revenue stream from brick-and-mortar stores as a result of the COVID-19 pandemic, the company's online sales and wholesale transactions alone are insufficient to enable the company to meet its outstanding liabilities as they become due. Absent a CCAA proceeding, the company faces a looming liquidity crisis. The company intends to close 82 of its Canadian stores and all 42 of its American stores. PwC was appointed monitor. Counsel is Fasken for the company and Stikeman Elliott for the monitor.