Claire’s Stores Canada Corp., CCAA

Claire’s Stores Canada Corp., the Canadian arm of accessories and cosmetics retailer Claire’s, obtained CCAA protection on August 6 listing approximately $71.3 million in liabilities, about $71.2 million of which is owed on account of an intercompany payable.

Claire’s Stores Canada operates an exclusively brick-and-mortar business from 120 leased retail store locations across 10 provinces. It currently employs approximately 700 people.

All merchandise sold in the Claire’s Stores Canada’s stores is sourced by an affiliate which manages purchasing and inventory for North America. Claire’s Stores Canada records merchandise shipped to Canada as intercompany payables.

The company is also dependent on its US affiliates for a broad range of administrative and operational services and is unable to operate independently. Claire’s Stores Canada is not profitable on a standalone basis and has incurred net losses of US $5.8 million for the last year.

Over the past several months, Claire’s US undertook a marketing process which did not result in a deal for the business or assets on a standalone basis. At the same time, the company entered into a forbearance agreement with its ABL lenders that required it to commence Chapter 11 proceedings, which were also initiated on August 6. Claire’s Stores Canada has recently received notices of termination for 26 leases as a result of unpaid rent.

The purpose of the Chapter 11 and CCAA proceedings is to engage with landlords and other stakeholders, review the lease portfolio and exit unprofitable stores, and to conduct an orderly liquidation of remaining inventory at those stores.

KSV is the monitor.

Counsel is Osler for the company and Goodmans for the monitor.