Danier Leather begins insolvency proceedings
90-store Canadian chain hopes to find buyer or finish insolvency process by end of March
Canadian retailer Danier Leather has begun insolvency proceedings that could lead to a sale of all or part of the company and possibly bankruptcy.
The chain has 90 stores across Canada and hopes to find a buyer or complete the insolvency process by the end of March.
The company's shares were halted on the TSX before the news came out. In a separate release, the stock exchange says it is reviewing the status of Danier's shares for possible delisting.
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Officially, the company has announced it has "commenced insolvency proceedings" under a Canadian law known as the Bankruptcy and Insolvency Act.
Companies begin proceedings under the act when they need time to hold off their creditors from taking any and all measures to get back what they are owed, including seizing assets.
In that way, insolvency proceedings basically buy companies time to restructure themselves in order to pay their debts and continue to exist. But formal bankruptcy is possible if the restructuring isn't achieved.
Danier is trying to identify "one or more interested parties that wish to acquire or make an investment in the company's business or all or some of its assets," it said in a release, "or to liquidate the company's assets."
"It is important to note that the company is not bankrupt," said Danier. "The company has sufficient resources to fund its operations during the [insolvency process] and its stores will remain open for business during that time, subject to any restructuring steps that the company may take during the process," which the company hopes to have completed in about a month.
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In the release, Danier said a company called GA Retail Canada, ULC has submitted what's known as a "stalking horse bid" for the company, which is the baseline price that other offers must beat in order to be considered.
"The Stalking Horse Bid includes an agreement by GA Retail or an affiliate thereof, to liquidate the company's inventory and store furniture, equipment and fixtures if no superior offer emerges from the [insolvency process]," the release said.
The company is keenly aware of the challenging times for Canadian retail.
In the company's 2015 letter to shareholders, Danier's CEO Jeffrey Worstman wrote:
"During the last several years, many well-known Canadian retailers have failed to adapt to increased competition from department stores online merchants and global fashion chains. The situation is further complicated by the weakening Canadian dollar."
Danier's last quarterly earnings at the end of November showed the company's same-store sales had shrunk by 10 per cent in the previous year, while the amount the chain owed to its bankers had increased by 669 per cent to more than $20 million.
The company also said it expects to lose even more money in 2016 as operating losses have worsened.