Spareparts receivership leaves staff, gift card holders hanging
SASKATOON Almost 30 people in Saskatchewan face an uncertain future after declining sales and millions of dollars in debt forced a local accessories retailer to enter receivership earlier this month.
Spareparts — the operating name of two numbered companies — earlier this year had 82 employees, including 26 at two retail stores in Saskatchewan and its Saskatoon headquarters, according to court documents.
Between November 2016 and September 2017, the combined companies lost $862,000 on revenues totalling $16.6 million, while owing $4.86 million to two secured lenders plus more than $3.7 million to dozens of unsecured creditors, the documents show.
“The business has suffered from the overall decline in the North American retail marketplace … compounded by the severe economic downturn in Alberta, where the majority of the sales occur and revenues are generated,” Spareparts CEO Danny Mysak said in an affidavit.
The companies applied for and were granted creditor protection in October, at which point KPMG Inc. was appointed to oversee a planned restructuring.
KPMG on Nov. 21 recommended the court approve a so-called “stalking-horse bid,” which it said would keep around 80 workers in their jobs. The court approved the potential sale, but Spareparts entered receivership on Dec. 12.
In Canada, receivership is a process whereby a secured lender appoints a third party to help creditors recover their funds, either by working to maximize profits, selling the business or liquidating its assets.
Other unsecured creditors include gift card holders. KPMG said in a letter to those who purchased but did not redeem gift cards that they will not be honoured and “it is unlikely there will be any realization available for unsecured creditors.”
It’s unclear how many Spareparts stores are still operating.
Mysak did not respond to requests for comment on Tuesday. Cameron Browning, a senior adviser for KPMG Inc., said in an email the financial services firm does not respond to press inquiries.