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Too big to fail? Provincial government might help bail out Louis Garneau Sports

Published March 8, 2020

MONTRÉAL (BRAIN) — Louis Garneau Sports, Inc., which has requested creditor protection from the Canadian government, has listed over CAN$32 million ($24 million) in debts to a long list of creditors including Chinese factories, Canadian banks, the company's own U.S. subsidiary, and a company owned by Louis Garneau's wife.  

Le Journal de Québec, a news site, reported Friday that provincial officials are evaluating how to help the 37-year-old company recover. At a news conference last week, Louis Garneau said he was hoping to restructure the company and remain in Québec. He said he was seeking financial help and advice from within the province. 

The company has not yet filed a list of assets. Sixty-six employees at its headquarters in Saint-Augustin-de-Desmaures, Québec, were laid off last week when the filing was announced.

The bankruptcy in Canada does not affect related companies in the U.S., Mexico and elsewhere, a spokesman for the company told BRAIN. "The situation only concerns Louis Garneau Sports with the office in Québec," said the spokesman, David Couturier. "There is no impact (jobs, business activities) in the U.S. or elsewhere." Louis Garneau USA, the company's subsidiary based in Vermont, is listed as a creditor owed CAN$614,000. 

Documents from Raymond Chabot Inc., Garneau's insolvency trustee, show debts owed to more than 500 creditors.

One of the largest is CAN$1.86 million owed to Gestion Monique Arsenault, Inc., a company reportedly owned by Louis Garneau's wife, Monique Arsenault. 

Other creditors include the Royal Bank of Canada, owed CAN$11.4 million; Investissement Québec, an investment company created by the National Assembly of Québec to support Québec-based businesses, which is owed CAN$6.37 million; Aguila, a Taiwan-based company that produces shoes and gloves in China and Cambodia, owed CAN$1.15 million; a Chinese company listed as "Xiamen (JDX)", owed CAN$804,000; and Horizontal Co., LTD, a trading company based in Shenzhen, China, owed a total of CAN$817,000. 

The company also owes its employees $671,368. 

Creditors with familiar names within the bike industry include Highway Two, owed CAN$6,825; Ideal Bike Company, owed CAN$384,000; pro racer Geoff Kabush, owed CAN$2,000; Cycles Lambert, owed CAN$32,551; ACT Lab, owed CAN$2,278; and Outdoor Gear Canada, owed CAN$3,186.

Unsecured debt is owed to 495 creditors and totals $14,918,000. The remainder is owed to eight secured creditors. 

Garneau's bankruptcy may have been in part spurred by the Feb. 20 bankruptcy of La Cordeé, a Canadian sporting goods chain. However, public records show La Cordeé owes just CAN$75,515 to Louis Garneau Sports. Garneau was exhibiting troubles months before the La Cordee bankruptcy, including the closure of a textile factory in Québec last year, which cost about 50 jobs. 

Louis Garneau, in a statement, pointed to the bankruptcy of two international customers three years ago.

"We have hit a headwind due to the extreme difficulties the industry is facing, combined with the challenges of the retail market in general," Garneau said. "Our problems started 36 months ago when two of our larger international customers filed for bankruptcy, creating a significant strain on our cash flow.

Louis Garneau USA was among the creditors when ASE, the parent company of Performance Bicycle Shops, filed bankruptcy in late 2018. The company was owed $207,000. The company also was a creditor when the UK retail chain Evans Cycles filed for insolvency in 2018.

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