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Garneau restructuring proposal would leave little for unsecured creditors

Published August 26, 2020

MONTRÉAL (BRAIN) — Louis Garneau Sports' proposed restructuring plan would allocate about $550,000 Canadian dollars ($418,000) to be shared by the company's unsecured creditors, who are owed about CA$12.8 million, according to official documents released this week. Sugoi Global Inc., an LGS subsidiary that filed for insolvency protection separately in March, is proposing to allocate CA$300,000 to its unsecured creditors, who are owed CA$2.9 million.

Garneau announced last week that it has received an offer from a group of Québec investors who it has not identified. The proposal released this week indicates the group will invest at least CA$8 million.

A creditor's meeting is scheduled for Sept. 10. Louis Garneau's U.S. operations, headquartered in Vermont, are unaffected by the bankruptcy, company representatives said.

Counting secured and unsecured debts and debts owed to employees, LGS owes CA$28.1 million. Sugoi Global owes another CA$7.9 million. 

According to filings, LGS saw "an approximate $15M decline in sales from 2016 to 2019, primarily due to the market consolidation of independent retailers and the loss of a major customer." in the recent history, LGS had sales of CA$45.9 million in 2018, declining to CA$40.8 million last year. The company's losses were CA$1.4 million and CA$8.4 million in 2018 and 2019 respectively, before taxes.

LGS bought Sugoi from Dorel in 2018. The following year, Sugoi had sales of CA$11.1 million and lost CA$1.3 million before taxes. 

In response to the losses in recent years, prior to filing for bankruptcy and insolvency protection, LGS closed a custom apparel factory in Québec (moving custom production to its facility in Mexico) and closed three unprofitable retail stores. Company founder and president Louis Garneau and his wife also injected more than CA$2.5 million into LGS.

The Royal Bank of Canada, which is a secured creditor, has provided interim financing of CA$1.5 million.


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