Colabor, a wholesale food distributor based in Saint-Bruno, has turned to the courts seeking protection from creditors amidst significant financial difficulties. The company intends to initiate an official sales process, having reportedly received interest from potential buyers.
Court Protection for Colabor
Colabor plans to file a request with the Superior Court of Quebec, seeking an order under the Companies’ Creditors Arrangement Act. This legal step aims to establish a formal sales process and to attract investments. The company’s move is intended to give interested parties a chance to submit proposals for the most favorable transaction.
Suspension of Creditor Claims
The court order sought by Colabor would also suspend claims from creditors, allowing the company to negotiate better terms. Additionally, Colabor is looking to secure temporary financing from banks to support its sales process and ongoing operations during restructuring.
Trading of Colabor’s stock on the Toronto Stock Exchange has been halted. Currently, the share price stands at just 4 cents, translating to a market capitalization of approximately $4 million. Notably, Colabor’s market value was around $100 million following a serious cybersecurity breach detected last July.
Financial Challenges and Market Conditions
Colabor attributes its financial troubles to various factors. A slowdown in both the restaurant and retail markets in recent years has negatively impacted revenue. The company’s financial stability is further jeopardized by the upcoming expiration of a significant agreement with a governmental institutional client, which constitutes over 12% of Colabor’s projected revenue for the current fiscal year.
Although this agreement was renewed, the terms became less favorable due to prevailing economic conditions, substantially reducing profit margins.
Increased Debt and Leadership Changes
Earlier this year, Colabor increased its debt load to finance the acquisition of food distribution assets from Alimplus. This decision came just weeks before a cyberattack that severely disrupted service during the busy construction holiday period.
Additionally, the company faced leadership changes, including the departure of former CEO Louis Frenette following the cybersecurity incident. In light of liquidity issues, Colabor struggled to meet refinancing requirements for its credit facilities.
Company Background
Founded in 1962 by 37 distributors in Quebec, Colabor started as a purchasing cooperative for bulk confectionery products. Over the years, the company excelled in wholesale distribution across Quebec and Atlantic Canada, supplying products to the hospitality, restaurant, institutional markets, and retail sectors. Its diverse offerings include dry goods, beauty and personal care products, refrigerated items, frozen foods, and other food-related products.
