The financial problems at DavidsTea could have reverberations on Metro Vancouver's commercial real estate sector.
That's because several property owners are on a list of the Montreal tea merchant's creditors, who are collectively owed $17.3 million.
Subsidiaries of Ivanhoe Cambridge, for instance, are owed $658,286.36.
This figure includes $69,677.88 at Metropolis in Metrotown and $68,932.88 at Tsawwassen Mills in Tsawwassen.
Two Cadillac Fairview malls—Pacific Centre in Vancouver and Richmond Centre in Richmond—are owed $91,554.92 and $43,001, respectively.
Shape Property Management, which owns the Uptown Mall in Victoria and Brentwood Centre in Burnaby, is owed $78,199.61.
DavidsTea also owes $68,775.20 to Guildford Town Centre LP in Surrey.
And Park Royal Shopping Mall is owed $38,249.56
On July 8, the tea company obtained a court order under the Companies' Creditors Arrangement Act.
Today, a Quebec Superior Court judge approved an amended and restated initial order, which extends protection from creditors until September 17.
"As previously announced, DavidsTea’s restructuring efforts under the CCAA are focused primarily on exiting unprofitable stores and right-sizing its Canadian brick and mortar footprint in the context of an increasingly challenging retail environment, further exacerbated by the COVID-19 pandemic," the company said today.
"DavidsTea’s objective is to create a leaner and more efficient company and to accelerate its transition to an online retailer and wholesaler of high-quality tea and accessories, better positioned for long-term growth."
The Companies' Creditors Arrangement Act is federal legislation designed to help debtor companies avoid bankruptcy through financial restructuring.
Under the current order, creditors cannot launch court action against DavidsTea while creditor protection is in place.
According to a paper written by lawyers Steven L. Graff and Ian E. Aversa, the Companies' Creditors Arrangement Act does not provide statutory guidance with regard to landlord and tenant issues. In this way, it differs from the Bankruptcy and Insolvency Act.
"Therefore, all landlord and tenant issues in CCAA proceedings are determined principally by reference to court orders issued pursuant to the CCAA, the common law on point and the practice developed under the BIA and the relevant provincial legislation, such as the CTA [Commercial Tenancies Act]," they wrote.
"While the absence of statutory guidance leads to uncertainty, proceedings under the CCAA can be advantageous to an insolvent commercial tenant because of their inherent flexible nature."
The big mall owners aren't the only ones on the hook.
TAT Mgt. Co. in Trust Linkman International, for instance, was due $83,790 when the tea company sought creditor protection.
DavidsTea also owes Yenik Realty, which is on West 4th Avenue, $45,349.56.
Warrington PCI ITF Cottonwood Mall, which is based in Vancouver, is owed $46,768.56. And Templeton doc limited Partnership, also based in Vancouver, is owed $42,945.80.
Subject to the approval of the court-appointed monitor, DAVIDsTEA can restructure its business by permanently or temporarily ceasing, downsizing, or shutting down any operations or locations as it deems appropriate.
DavidsTea can also "terminate the employment of such of its employees or temporarily or permanently lay off such of its employees as it deems appropriate", according to the court order.
To the extent that any amount is owed in lieu of notice, termination or severance paid, the terms must be agreed upon between the company and the employee. Failing such an agreement, the company must "make provision to deal with this" in its restructuring plan, according to the court order.