Le Château Inc. (TSX:CTU)

Le Château Inc. (TSX:CTU), a Montreal, Quebec-based fashion retailer with a 60-year history and 121 stores across Canada, obtained protection under the CCAA on October 23, listing approximately $125.0 million in liabilities, including $21.2 million in deferred rent owing to landlords, and $81.0 million in assets. In the three-month period up until July 25, the company made $14.7 million in sales across its network of stores and online, down from $50 million in the same period last year. Since 2015, the company's network had already been reduced by almost 50% to adapt to the changing retail landscape and consumer shopping habits. The ongoing COVID-19 pandemic further impacted consumer demand for the company's holiday party and occasion wear, which represents the core of the company's business. Despite re-opening its stores, the company's brick-and-mortar operations continue to be negatively impacted by COVID-19 safety measures. While the company intends to remain fully operational as it liquidates its stores, eventual closures will mean the termination of approximately 1,400 jobs. During these CCAA proceedings, the company will receive interim financing from Wells Fargo Capital Finance Corp. Canada. PwC was appointed monitor. Counsel is Stikeman Elliott for the company, Norton Rose Fulbright for Wells Fargo, Osler for the monitor, McCarthy Tétreault for Gordon Brothers Finance and Fasken for Gordon Brothers and Hilco.

HOW Fashions International Inc.

HOW Fashions International Inc., Montreal, Quebec-based importer and distributor of women’s and men’s high-end fashion brand clothing and accessories, and 9896481 Canada Inc., the owner of certain trademarks related to fashion brands sold by HOW Fashions International Inc., each filed an NOI on October 22. The business suffered drastic financial difficulties as a result of the COVID-19 pandemic, resulting in the brand and the related merchandise having little realizable value. HSBC, the companies' senior secured creditor, engaged EY to assess the companies' operations with the companies' advisors. In August, the companies and their advisors began to implement a recovery and exit plan, including soliciting prospective purchasers for the sale of some or all of the companies’ assets. This resulted in the companies receiving an offer made by Captive Brands Corp. to purchase all of the companies’ intellectual property, as well as assets of its US counterpart, HOW International USA, Inc. The Quebec Superior Court (Commercial Division) granted an Approval and Vesting Order on October 29. EY is the proposal trustee. Counsel is Kugler Kandestin for the companies, Scheib Legal for Captive Brands Corp., Davies for HSBC and Fasken for the proposal trustee.

G.I. Sportz Inc.

G.I. Sportz Inc., a Montreal, Quebec-based manufacturer of high-quality paintball products, along with several of its US and European affiliates, were placed in receivership on October 15 on application by GIS Debt Acquisition Partnership ("Partnership"), owed approximately $29.4 million (USD). The company's business was already under considerable stress prior to the emergence of the COVID-19 pandemic, having incurred losses totaling over $45.0 million (USD) since January 2018. Since paintball is a social sport played by a large number of participants, often in teams and in relatively confined areas, the COVID-19 pandemic further exacerbated the company's financial issues due to Canadian and US government policies mandating social distancing. Kore Outdoor Inc., a party related to the Partnership, has agreed to purchase substantially all of the company's Canadian and US assets in exchange for assuming the secured obligations owed by the company to the Partnership. KSV was appointed receiver. Counsel is Davies for the applicant and Cassels and Lapointe Rosenstein Marchand Melançon for the receiver.

Okaïdi Canada

Okaïdi Canada, the Canadian subsidiary of a French children's clothing retailer, filed an NOI on October 7, listing approximately $15.8M in liabilities. In 2010, the company entered the Canadian market and currently operates 15 stores in Quebec and Ontario. Given the COVID-19 environment and the impact on the retail sector, the company suffered significant losses and a major reduction in its sales. The company will evaluate its restructuring options in the coming weeks, including having discussions with landlords. Richter is the proposal trustee. Counsel is BDG Law for the company and Stikeman Elliott for the proposal trustee.

Essentia Group Inc. (“Essentia”) and 6860966 Canada Inc. (“686”)

Essentia Group Inc. ("Essentia") and 6860966 Canada Inc. ("686") (collectively, the "Debtors") filed NOIs on September 14. Essentia is a domestic manufacturer and distributor of organic memory foam mattresses with facilities in Laval, Quebec, and 686 owns the patent and trademarks used by Essentia in the conduct of its business. Started in 2006, the Debtors' business has recently been plagued by a series of profitability issues and financial difficulties, including the $1.0 million it sustained in losses after its retail expansion in the US did not result in profitability, as well as the COVID-19 pandemic. Consequently, the Debtors continue to accumulate significant losses which have been financed by credit facilities provided by BMO and loans provided by BDC, BDC Capital Inc., and Investissement Québec. Since 2017, the Debtors have been engaged in several unsuccessful discussions with parties regarding the possibility of purchasing some or all of their assets or becoming the Debtors' financial partner. In August, While You Were Sleeping Inc. (on behalf of a purchaser) offered to purchase all of Essentia's movable property and 686's intellectual property. The court has issued an Approval and Vesting order authorizing the sale of the Debtors' assets to the purchaser, which will enable the continuation of Essentia's business and retain the jobs of its 15 employees. MNP is the proposal trustee. Counsel is Kugler Kandestin for the Debtors, Fishman Flanz Meland Paquin for the purchaser, Davies for the senior secured lender, BMO, and Société D'Avocats Dexar for BDC and BDC Capital Inc.

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.

Alasko Foods Inc. and Alasko Foods LLC

Alasko Foods Inc. and Alasko Foods LLC, a Montreal, Quebec-based company that specializes in the distribution of frozen fruits and vegetables, was placed in receivership on September 4, owing approximately $26.9 million to PNC Bank Canada. According to a Global News report, Cesar Ramirez — the owner of Frutti di Bosco, a Chilean fruit trading company — alleged that he had colluded with Alasko Foods Inc. to ship fraudulently labelled raspberries to Canada, although the company has denied these claims. Prior to the issuance of the receivership order, the companies had engaged Raymond Chabot to run a Sale and Investor Solicitation Process to identify and solicit potential buyers and investors. On October 13, the receiver, Raymond Chabot, and a purchaser agreed to a final form of an Asset Purchase Agreement whereby the receiver would sell substantially all of the companies' assets to the purchaser, minus the company's assets which are located in Ingersoll, Ontario. Fasken is counsel to the receiver.

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.