Coalision, the Montreal-based parent of Lolë and Paradox activewear brands, has filed to reorganize under the Bankruptcy and Insolvency Act in Canada to seek new funding or a buyer.
According to a court document, Coalision’s financial difficulties were primarily caused by:
- The general downturn in the global retail clothing market;
- Competition from other established and emerging clothing retailers who specialize in the activewear space;
- Shift in consumer habits away from traditional shopping toward online point-of-sale which affected Coalision’s retail and wholesale business;
- Significant investment in opening stores in Europe and in certain areas of the U.S. that were not profitable; and
- Excess accumulated inventory mostly during 2019.
The filing also noted that COVID-19 and the closure of all Lolë stores had a “further significant and detrimental impact” on Coalision’s business and revenues since March 2020.
The filing stated, “Absent the ability to restructure its operations, Coalision will not continue its operations.”
Deloitte Restructuring Inc., based in Montreal, has been appointed NOI (Notice Of Intention) trustee in the case. Coalision said that along with Coalision it undertook a number of restructuring initiatives prior to the filing including the initiation of a limited sale and investment solicitation process to identify a strategic partner that could inject new funding or purchaser.
The restructuring plan with the filing “is to continue such process to identify a purchaser or investor for Coalision’s assets.”
Filings note that as of February 29, Coalision employed 232 employees, of which 85 were employed at its head office in Montreal, 17 in its distribution center and 130 across its 19 retail stores in Canada
Revenues were C$80.7 million in 2019, down from C$89.2 million in 2018 and against C$86.3 million in 2017. EBITDA showed a loss of C$518,000 in 2019 against a profit of C$69,000 in 2018 and a profit of C$2.3 million in 2017. The net loss came to C$7.3 million in 2019 against a loss of C$5.0 million in 2018 and a loss of C$13.6 million in 2017.
As of December 31, Coalision showed total liabilities of C$57.6 million, including long term debt of C$27 million, a bank loan of C$17.2 million and accounts payables of C$11.3 million.
Secured and unsecured creditors are owed C$55.4 million, including C$44.1 million ito secured credits and C$11.3 million to unsecured creditors. Secured creditors by rank include Canadian Imperial Bank, owed C$17.2 million; Simon Coalision Investment, C$15.4 million; Pelican II Coalision Investment, C$6.6 million; and Groupe Lune Rogue, C$5 million.
In 2018, Coalision Inc. has secured U.S. $18 million in financing from existing backers and shareholders Simon Equity Partners and Pelican Investment Fund, a management-based fund owned by former Quiksilver president Bernard Mariette.
Photo courtesy Coalision