B.C. pub, restaurant chain files for creditor protection
Vancouver-based restaurant and pub chain the Donnelly Group has filed for creditor protection, with court documents showing the company owes a combined total of roughly $20 million to the bank, landlords, suppliers and government.
The company announced the move in a news release Wednesday saying it has initiated proceedings under the Companies' Creditors Arrangement Act, the federal law that allows corporations owing more than $5 million to restructure their business and finances in order to try to avoid bankruptcy.
The Donnelly Group operates 11 hospitality businesses in Vancouver and three in Toronto as well as a chain of barbershops, Bomber Brewery and a cleaning company that services the businesses.
"Despite the often startling perception of this filing, it's very much a constructive versus destructive financial tool that will first bring added stability and then growth to our businesses operating in the embattled hospitality industry" the company's founder and CEO Jeffrey Donnelly said in the news release.
"This will be a survivor's tale, one that we're saddened to recognize cannot be told for many of our hospitality peers due to the tragic effects of the pandemic."
According to the petition filed in B.C. Supreme Court, the company employs 815 people and has "tangible assets" of roughly $1.85 million.
"The hospitality entities primary asset is its goodwill in the hospitality industry. The name 'Donnelly Group' is synonymous with the petitioners' style of hospitality offering, which has a high profile within the Vancouver market," the court documents say.
Pandemic-related closures and restrictions are cited as the main reason why the company is saddled with so much debt, something the petition says has been compounded by factors such as an increased minimum wage, mandatory paid sick days, inflation and higher interest rates. The company says labour costs have gone up by 12 per cent and food costs by 15 per cent.
"Business has returned to close to 2019 revenue levels, but there has been margin compression due to increased labour and operational costs resulting in much less profitable businesses," the court filing says.
"Further, the businesses have experienced significant losses over the last 2.5 years and have had to service these expenses in addition to the additional bank debt."
The Donnelly Group is currently making interest-only payments of $295,000 per month to the Bank of Montreal. Paying down the principal is something the company says it can not do on a "go-forward basis." The total owing to the bank is just under $15 million, the petition to the court says.
Roughly $3 million combined is owed to the federal and provincial governments for GST, overdue PST from 2022, corporate income tax and employee health and WCB amounts.
"In order to maintain operations, the petitioners have prioritized payments to their employees and critical suppliers, and they are in arrears with CRA, some of their landlords and trade creditors," the court documents say.
The hospitality businesses owe $1.5 million in "trade payables" that are more than 60 days past due. Six locations have a combined $766,184.68 in overdue rent. The business was only able to make payroll on May 18 because of a cash advance from the CEO, the court documents say.
Because the debt totals roughly 10 times the value of the company's assets, liquidation would mean the bank would be paid significantly less than it was owed while other creditors would get nothing, the court documents say, adding that there would also be a loss of "goodwill and key staff" if the businesses had to be closed or taken into receivership.
The statement from the company says it is "optimistic" that restructuring will be completed within the next several months.
"The company aims to continue working co-operatively with its lender to revise the terms of existing loans, restructure the debt that was required to survive the pandemic, and to emerge as a more robust organization," it says.
"During this period, it expects to continue operating all of its locations without interruption, maintain relationships with suppliers and service providers, and engage its employees at current levels."
The news from the Donnelly Group comes on the heels of a study by Restaurants Canada that found the number of restaurants filing for bankruptcy has increased by 116 per cent since 2022.
Correction
A video report previously posted at the top of this article included images of the Library Square Pub in Vancouver, which is no longer owned by or affiliated with the Donnelly Group. The video has been removed.
CTVNews.ca Top Stories
B.C. tenants evicted for landlord's use after refusing large rent increase to take over neighbouring suite
Ashley Dickey and her mother rented part of the same Coquitlam duplex in three different decades under three different landlords.
Mountain guide dies after falling into a crevasse in Banff National Park
A man who fell into a crevasse while leading a backcountry ski group deep in the Canadian Rockies has died.
Expert warns of food consumption habits amid rising prices
A new survey by Dalhousie University's Agri-Food Analytics Lab asked Canadians about their food consumption habits amid rising prices.
MPP Sarah Jama asked to leave Ontario legislature for wearing keffiyeh
MPP Sarah Jama was asked to leave the Legislative Assembly of Ontario by House Speaker Ted Arnott on Thursday for wearing a keffiyeh, a garment which has been banned at Queen’s Park.
Charlie Woods, son of Tiger, shoots 81 in U.S. Open qualifier
Charlie Woods failed to advance in a U.S. Open local qualifying event Thursday, shooting a 9-over 81 at Legacy Golf & Tennis Club.
Ex-tabloid publisher testifies he scooped up possibly damaging tales to shield his old friend Trump
As Donald Trump was running for president in 2016, his old friend at the National Enquirer was scooping up potentially damaging stories about the candidate and paying out tens of thousands of dollars to keep them from the public eye.
Here's why provinces aren't following Saskatchewan's lead on the carbon tax home heating fight
After Prime Minister Justin Trudeau said the federal government would still send Canada Carbon Rebate cheques to Saskatchewan residents, despite Saskatchewan Premier Scott Moe's decision to stop collecting the carbon tax on natural gas or home heating, questions were raised about whether other provinces would follow suit. CTV News reached out across the country and here's what we found out.
Montreal actress calls Weinstein ruling 'discouraging' but not surprising
A Montreal actress, who has previously detailed incidents she had with disgraced Hollywood producer Harvey Weinstein, says a New York Court of Appeals decision overturning his 2020 rape conviction is 'discouraging' but not surprising.
Caleb Williams, Jayden Daniels and Drake Maye make it four NFL drafts with quarterbacks going 1-3
Caleb Williams is heading to the Windy City, aiming to become the franchise quarterback Chicago has sought for decades.