Judge grants creditor protection for BuildDirect

Vancouver’s BuildDirect, which pioneered the online sale of construction materials, has filed for protection from its creditors after failing to engineer a rescue from its mounting debts, according to court documents.

The company’s filing on Oct. 31 follows from the abrupt Oct. 27 departure of BuildDirect’s founder and CEO Jeff Booth, who announced the development in a post to his LinkedIn profile that alluded to a growth plan that hit a wall when revenue stalled.

“As this problem intensified, I made a fateful decision to bring more debt into the company to try to get to the other side of our technology build,” Booth wrote.

Although business improved, Booth wrote that the decision “created an unforeseen roadblock” to his leadership, which prompted his departure.

In the court filings, BuildDirect points to its failure to complete a financing that involved selling a significant piece of its equity as the immediate cause of its financial difficulties, though its losses were mounting on a monthly basis.

“BuildDirect’s operations have consistently generated significant revenue but it has not yet achieved profitability,” the company’s petition to B.C. Supreme Court read.

While sales had generated $72 million in revenue to the end of September, “costs have exceeded revenues by approximately $2.6 million per month.”

The company owes a total of $75 million to three groups of lenders, and in the last year “has breached certain covenants” to those secured creditors.

“BuildDirect is unable to meet its obligations as they come due, and without access to immediate interim financing, the company will not be able to continue its operations,” the petition reads.

B.C. Supreme Court Judge Robert Sewell granted BuildDirect’s petition in an order that approved the appointment of the accounting firm PwC as its monitor.

Proceedings in the case were set over for a hearing Nov. 14 in Vancouver.