Groupe Dynamite

Groupe Dynamite, a Montreal, Quebec-based fashion retailer that operates 322 retail stores under the brands Garage and Dynamite, obtained protection under the CCAA on September 8, listing approximately $357.0 million in liabilities and $192.0 million in assets. The company owes $149.4 million to a banking syndicate composed of National Bank of Canada, BMO, TD, and Fédération des caisses Desjardins du Québec. After record performances in 2019 and early 2020, the company was negatively affected by the ongoing pressures of COVID-19 store closures, social distancing measures, and closed borders resulting in a significant lack of tourism. Increases in digital sales since the beginning of the pandemic were not able to offset the massive impact of store closures, and the company's overall sales dropped by 50% compared to the same period in 2019. The company has unsuccessfully tried to renegotiate its store leases in order to limit its losses. During these CCAA proceedings, a numbered company will be providing up to $20.0 million in interim financing. Deloitte was appointed monitor. Counsel is McCarthy Tétrault for the company and Dentons for the National Bank of Canada.

Ernest Enterprises

Ernest Enterprises, a privately-owned retail company selling men’s suits and leisure wear with 37 locations primarily in Quebec, obtained protection under the CCAA on September 4. The company, which currently owes approximately $3.0 million to HSBC and $2.0 million to BDC, mainly attributes its financial difficulties to the COVID-19 pandemic. Although the company was able to operate its online operations during the COVID-19 shutdowns, online sales have been insufficient to offset the lost revenue resulting from store closures. Demands of consumers have also changed due to work-from-home policies being implemented by many employers, as well as general financial uncertainty flowing from the crisis. In the context of very significant rental expenses and diminishing revenues resulting from the COVID-19 pandemic, it is anticipated that absent a restructuring under the CCAA, the company will face a looming liquidity crisis. HSBC has agreed to provide the company with interim financing during these CCAA proceedings. EY was appointed monitor. Counsel is Stikeman Elliott for the company, Norton Rose Fulbright for the monitor, Miller Thomson for BDC, and Davies for HSBC.

Laura’s Shoppe Inc.

Laura's Shoppe Inc., a Montreal, Quebec-based clothing retailer with 140 stores across Canada operating under the trade names Laura and Melanie Lyne, obtained protection under the CCAA on July 31, owing approximately $18.1 million to BMO and $13.4 million to its landlords. Founded in 1930, the company attributes its current financial difficulties to the detrimental impact the COVID-19 pandemic has had on the retail business. In July 2015, the company had filed an NOI as a result of issues it was facing with its then-lender, Salus Capital Partners. The NOI proceedings were later continued under the CCAA. The company emerged from its restructuring proceedings as a stronger business and was able to successfully operate in the rapidly-changing retail landscape until very recently, when its operations were blindsided by the unprecedented and unforeseeable pandemic. Although the company has been able to operate its online business in recent months, the online sales have been insufficient to offset the lost revenue resulting from store closures. KMPG was appointed monitor. Counsel is Fishman Flanz Meland Paquin for the company, Stikeman Elliott for the monitor, and Dentons for BMO.

Kanwal Inc.

Kanwal Inc., a Magog, Quebec-based automotive sealing supplier with almost 30 years of experience, filed an NOI on July 30, listing approximately $19.2 million in liabilities, including $4.3 million to BMO and $9.1 million to First West Capital Loan. While the company has been negatively impacted by the COVID-19 pandemic, moving forward, it will be creating a more consolidated corporate structure and refinancing globally as part of its restructuring efforts. PwC is the proposal trustee. Sinclair Range is the Chief Restructuring Officer.

S. Cohen

S. Cohen, a St. Laurent, Quebec-based retailer of men's tailored clothing and outerwear which has been operating for almost 100 years, filed an NOI on July 30, listing approximately $5.1 million in liabilities, including $2.1 million to TD. Prior to COVID-19, the company was already facing a significant decline in sales and reduced traffic in its brick-and-mortar store locations. The COVID-19 pandemic resulted in further decreases in sales volume. Since men's suits depend heavily on fit, customers usually require in-store and physical access to the product. Furthermore, the general spending habits of consumers have changed, with less spending going towards business attire. As part of its restructuring, the company will be selling its business and assets. PwC is the proposal trustee. Kugler Kandestin is counsel to the company.

Tidal Health Solutions Ltd.

Tidal Health Solutions Ltd., a Montreal, Quebec-based cannabis producer with a facility in St. Stephen, New Brunswick, filed an NOI on July 30, listing approximately $17.9 million in liabilities. The company, which has had significant operating losses for the past several years, attributes its financial difficulties to the significant start-up costs of building its facility, delays in obtaining a licence, much lower growth rate in the cannabis market than anticipated, and difficulty accessing financing for Canadian cannabis companies. Furthermore, due to the COVID-19 pandemic and the resulting delay in launching Ontario retail stores, initial purchase commitments from Ontario were significantly disrupted. Iostesso Holdings will be providing up to $1.0 million in interim financing during these proceedings. PwC is the proposal trustee. McCarthy Tétrault is counsel to the company.

Stokes Inc.

Stokes Inc., a Montreal, Quebec-based leading tableware, kitchenware, and home décor retailer with 147 stores across Canada, had its NOI proceedings continued under the CCAA on July 27. The company owes approximately $11.4 million in liabilities, including $2.5 million (USD) to Scotiabank. Founded in 1935, the company attributes its financial difficulties to adverse macro-trends such as changing consumer preferences, expensive leases, and a general shift away from brick-and-mortar to online retail channels. In addition, increased competition from discount and online retailers has exerted significant downward pressure on pricing and margins. Due to the COVID-19 pandemic, the company requires additional time to complete a liquidation sale for its stores and formulate a proposal for creditors. However, it has become evident that the company will not be able to do so before the expiry of the 6-month period following the filing of the NOI. Richter was appointed monitor. Counsel is Osler for the company, Stikeman Elliott for the monitor, and Kugler Kandestin for Scotiabank.

Bô Bébé

Bô Bébé, a Montreal, Quebec-based retailer of baby products, filed an NOI on July 22, listing approximately $7.2 million in liabilities, including $1.4 million to Kidiway Inc. ("Kidiway"), a related company, and $1.0 million to Investissement Québec. Like many retailers, the company struggled due to the COVID-19 pandemic, and after the two-month government closures of retail establishments, it decided not to reopen certain of its brick-and-mortar stores. Increased indebtedness due to these store closures, decreased sales due to competition, and the financial difficulties of Kidiway resulted in significant increased pressure from its lender, National Bank of Canada, leading the company to file the NOI. With a refocused business in one retail location and one online store, the company expects to imminently be in a position to make a proposal to its creditors and continue its business as a going concern. Currently, a company (the "Purchaser") intends to purchase substantially all of Kidiway’s assets. MNP is the proposal trustee. Counsel is Fishman Flanz Meland Paquin for the company, Morency Société d'Avocats for National Bank of Canada, and Kugler Kandestin for the Purchaser.

Tristan

Tristan, a Montreal, Quebec-based clothing retailer with over 40 locations in Quebec, Ontario and Alberta, filed an NOI on July 21, listing approximately $32.9 million in liabilities. The vast majority of the company's stores are located in malls, which have not been open for months. The company has also been without an operating loan for several months. The company announced that no layoffs or store closures are in the plans, though it will attempt to renegotiate leases. It also plans to make investments in technology. MNP is the proposal trustee. Counsel is Stikeman Elliott for the company and BLG for the proposal trustee.

DAVIDsTEA (NASDAQ:DTEA)

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.

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