Pandemic struggles push Vancouver’s Donnelly Group to apply for creditor protection

May 24 2023, 8:23 pm

Donnelly Group, the owner of more than a dozen popular bars and restaurants in Vancouver, has filed for creditor protection amid financial troubles.

The Donnelly Group initiated Companies’ Creditors Arrangement Act proceedings in the BC Supreme Court Tuesday, according to court documents obtained by Daily Hive. The company owes more than $20 million on its lines of credit, unpaid rent, taxes, and business expenses.

“Although the company is historically profitable, it was forced to take emergency loans through the Covid-19 pandemic to help fund significant losses from shuttered locations and those operating with dramatically reduced business,” Harrison Stoker, chief growth officer, told Daily Hive.

“As we all now know, the pandemic and its after-effects lasted far longer than expected, with the hospitality sector perhaps being the most unfortunate benefactor.”

As the restaurants and bars reopened, the Donnelly Group said in court documents it faced additional challenges including minimum wage increases, additional paid sick days for employees, labour shortages that made hiring and retaining staff difficult, supply chain issues, and increased interest rates.

Stoker said the company initiated CCAA proceedings to continue cooperatively working with Bank of Montreal, its biggest lender, and other creditors to ensure its 800+ employees retain their jobs.

He added customers won’t likely see a change to business, and predicts the proceedings will last approximately three months — during which the bars will stay open.

“This will be survivors story,” Stoker said.

The company, now branded as Freehouse Collective, operates restaurants, bars, nightclubs, and barbershops in Vancouver and Toronto. Donnelly Holdings Ltd., solely owned by Jeff Donnelly, also owns Bomber Brewing and Lightbox, which operates cannabis dispensaries under the Dutch Love name that also recently filed for creditor protection.

Three Dutch Love Cannabis locations in Vancouver were named in the bankruptcy documents, and in March, the sale of the Kits, Robson, and Marpole locations to SNDL Inc. was approved for an unspecified sum. Stoker said he understands the stores will remain open but be rebranded. SNDL did not reply to Daily Hive’s request for comment.

The bars and restaurants named in the Donnelly Group CCAA proceedings are:

  • Granville Room
  • Academic Public House
  • The Three Brits
  • Clough Club
  • Cinema Public House
  • Sing Sing Beer Bar
  • Belfast Love (Toronto)
  • The Butcher and Bullock
  • Stock Room
  • Isabelle’s
  • Lamplighter
  • Death and Taxes (Toronto)
  • Walrus Pub and Beer Hall (Toronto)
  • Hello Goodbye

CCAA proceedings are insolvency proceedings available to large companies in Canada, and allow companies time to restructure during times of financial trouble.

Donnelly Group brings approximately $1.2 million of assets from its hospitality ventures (kitchen and bar equipment, screens, tables, etc.) and $700,000 of equipment from Bomber Brewing.

Donnelly Group employs approximately 750 employees in its hospitality businesses, plus 40 staff at Bomber and 25 barber employees.

Following pandemic-related difficulties, Donnelly Group entered into a debt-repayment agreement with BMO, where it had several business-related lines of credit. It’s only been making interest-related payments, and filed for creditor protection ahead of the forbearance deadline of May 31, 2023. It’s not in a position to make principal repayments, according to the court filings.

Donnelly Group’s restaurants and bars owe BMO about $13.6 million, and Bomber owes about $1.25 million.

In addition, the businesses also owe money to their landlords. The group pays about $367,00o monthly to a variety of landlords for the various bars and restaurants, but six of the businesses are in arrears — to the tune of a combined $766,184.

With unpaid taxes, and accounts payable added in, the Donnelly Group owes approximately $20.6 million.

The sum of the debt is much larger than what BMO could get if it sold off the individual businesses, and the Donnelly Group is asking for time to restructure its businesses and make repayments.

Financial firm Ernst and Young has been appointed as the monitor of the proceedings. The next hearing date in the case is set for June 2.

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