First Report to Court of
KSV Kofman Inc. as
Trustee in Bankruptcy of
Danier Leather Inc.
March 23, 2016
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Contents Page
1.0 Introduction..........................................................................................................1
1.1 Purposes of this Report............................................................................2
1.2 Currency ..................................................................................................2
1.3 Restrictions..............................................................................................2
2.0 Background .........................................................................................................3
3.0 Agency Agreement and Exiting Locations............................................................3
3.1 Recommendation.....................................................................................4
4.0 Occupancy Agreement ........................................................................................5
5.0 Conclusion and Recommendation .......................................................................5
Appendices
Appendix Tab
Receivership Order.............................................................................................................A
Summary of Leases............................................................................................................ B
Occupancy Agreement.......................................................................................................C
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ESTATE FILE NO.: 31-2084381
COURT FILE NO.: 31-2084381
ONTARIO
SUPERIOR COURT OF JUSTICE
(COMMERCIAL LIST)
IN THE MATTER OF THE BANKRUPTCY OF DANIER LEATHER INC.
FIRST REPORT OF KSV KOFMAN INC. AS TRUSTEE IN BANKRUPTCY OF
DANIER LEATHER INC.
MARCH 23, 2016
1.0 Introduction
1. On February 4, 2016, Danier Leather Inc. (the “Company”) filed a Notice of Intention
to Make a Proposal (“NOI”) pursuant to Section 50.4(1) of the Bankruptcy and
Insolvency Act R.S.C. 1985, c. B-3, as amended (“BIA”), and KSV Kofman Inc.
(“KSV”) was appointed proposal trustee in the Company’s NOI proceedings (the
“Proposal Trustee”).
2. In accordance with an Order of the Ontario Superior Court of Justice (Commercial
List) (“Court”) made on February 8, 2016, the Company, with the assistance of its
financial advisor, Consensus Advisory Services LLC and Consensus Securities LLC,
and the Proposal Trustee, carried out a sale and investor solicitation process (“SISP”).
3. As a result of the SISP, the Company entered into an Agency Agreement (“Agency
Agreement”) with a contractual joint venture comprised of Merchant Retail Solutions,
ULC and Gordon Brothers Canada ULC (jointly, the “Agent”) to liquidate the inventory
in the majority of its store locations. Prior to the NOI proceedings, the Company
entered into an agreement with Tiger Capital Group, LLC (“Tiger”) to liquidate
inventory in the Company’s ten other store locations.
4. On March 21, 2016, the Company made an assignment in bankruptcy and KSV was
appointed as Trustee in Bankruptcy of the Company’s bankrupt estate (“Trustee”),
subject to affirmation at the First Meeting of Creditors to be held on April 11, 2016.
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5. Pursuant to an Order of the Court made on March 21, 2016 (“Receivership Order”),
KSV became Receiver (the “Receiver”) of the Company’s property, assets and
undertaking pursuant to section 101 of the Courts of Justice Act, R.S.O. 190, c. C.43,
as amended. A copy of the Receivership Order is attached as Appendix “A”.
6. This report is filed by KSV in its capacity as Trustee.
1.1 Purposes of this Report
1. The purposes of this report (“Report”) are to:
a) provide background information about the Company;
b) provide the Trustee’s rationale that it should be authorized to:
i. disclaim leases prior to the First Meeting of Creditors;
ii. enter into an occupancy agreement with the Receiver (the “Occupancy
Agreement”), pursuant to which the Receiver will, inter alia, occupy the
premises, fund the costs of its occupancy and indemnify the Trustee in
respect of same; and
c) recommend that the Court issue an Order authorizing the Trustee to:
i. disclaim any or all of the Company’s real property leases, prior to the First
Meeting of Creditors; and
ii. enter into the Occupancy Agreement.
1.2 Currency
1. Unless otherwise noted, all currency references in this Report are to Canadian dollars.
1.3 Restrictions
1. In preparing this Report, the Trustee has relied upon unaudited financial information
prepared by the Company’s representatives, the Company’s books and records and
discussions with its representatives and advisors. The Trustee has not performed an
audit or other verification of such information.
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2.0 Background
1. The Company was founded in 1972. The Company was Canada’s largest retailer of
leather apparel and accessories. The Company’s subordinated voting shares were
listed on the Toronto Stock Exchange (“TSX”) and, until February 4, 2016, traded
under the symbol “DL”. On February 4, 2016, the Investment Industry Regulatory
Organization of Canada issued a cease trade order in respect of the shares. On
March 17, 2016, the Company’s shares were delisted from the TSX.
2. The Company leases its Toronto based head office (the “St. Clair Facility”). The St.
Clair Facility also served as the Company’s manufacturing, warehouse and
distribution center. The Company also leases a separate distribution facility in
Toronto.
3. The Company’s merchandise is predominantly marketed under the “Danier” brand
name and is currently sold in 81 leased stores across Canada.
4. As a result of the bankruptcy, all of the Company’s employees were terminated on the
date of bankruptcy. Pursuant to the terms of the Receivership Order, the Receiver
engaged approximately 900 of the Company’s former employees on a temporary and
day-to-day basis to assist with the wind-down of the Company’s business. The
Company’s workforce is not unionized and the Company does not maintain a pension
plan.
5. Additional information about the Company’s insolvency proceedings is available on
the Trustee’s website at: http://www.ksvadvisory.com/insolvency-cases-2/danier-
leather-inc/.
3.0 Agency Agreement and Exiting Locations
1. The Agency Agreement was approved by the Court on March 7, 2016. Pursuant to
the Agency Agreement, inter alia, the Agent is selling the Company’s inventory and
furniture, fixtures and equipment located at 76 of the Company’s store locations (the
“Sale”).
2. Pursuant to the Agency Agreement, the Agent is required to reimburse the Company
for occupancy costs for store locations subject to the Sale and to provide the Company
with seven days’ notice prior to vacating a store location, following which occupancy
costs for that location(s) would become the Company’s obligation.
3. The Sale is performing better than expected. The Agency Agreement contemplates
an exit date of June 30, 2016; however, the Agent has advised that the Sale is likely
to be completed several weeks earlier and that it will soon be exiting some stores.
4. Monthly occupancy costs for the Company’s leased locations total approximately
$1.6 million, inclusive of base rent, common area and maintenance charges. A
schedule of the Company’s leases is provided in Appendix “B”.
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5. Tiger has completed the sale at its ten store locations. No inventory remains in those
locations. The Company has vacated five of the locations as the leases were either
month-to-month or had expired. The Company continues to occupy the remaining
five store locations
1
. Occupancy costs continue to accrue in those locations and must
be paid by the Company absent a disclaimer of the lease.
6. According to the Company’s books and records, monthly rent has been paid for all of
the Company’s leased premises to March 31, 2016.
3.1 Recommendation
1. Pursuant to Section (30)(1)(k) of the BIA, the Trustee may elect to disclaim any lease
of the bankrupt with the approval of the estate’s inspectors. As the Company’s First
Meeting of Creditors is scheduled for April 11, 2016, inspectors have not yet been
appointed.
2. In the absence of inspectors prior to a First Meeting of Creditors, Section 19(1) of the
BIA permits a trustee to take such court proceedings as it considers necessary for the
protection of the bankrupt’s property. Further, Section 34(1) of the BIA allows the
Trustee to apply to the Court for directions in relation to any matter affecting the
administration of the estate of a bankrupt.
3. The Trustee believes that it is appropriate for the Court to authorize it to disclaim
leases for the Company’s leased premises for the following reasons:
the relief requested is consistent with Section 19(1) of the BIA;
the Company continues to occupy five store locations that have already been
closed. Estimated monthly occupation costs for those locations is
approximately $75,000. Should the Court grant the relief sought, the Trustee
intends to immediately disclaim these leases as there is no reason to continue
to occupy those locations; and
as additional locations are vacated, it will be uneconomic for the estate to
continue to fund their occupation costs
2
.
4. On March 22, 2016, the Trustee’s counsel advised the Service List that it intends to
seek this relief. The majority of the Company’s landlords are represented by counsel
on the Service List.
1
Represents store numbers 28, 53, 56, 71 and 86 as set out on the lease summary schedule attached as
Appendix “B”.
2
Any disclaimer will be consistent with the requirements under the Agency Agreement.
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4.0 Occupancy Agreement
1. As set out in the Fourth Report of the Proposal Trustee dated March 18, 2016, the
appointment of a receiver was necessary to assist with the orderly administration of
these proceedings, including the performance of the Company’s obligations under the
Agency Agreement.
2. Pursuant to the Receivership Order, the Receiver is authorized to enter into an
occupation agreement with the Trustee.
3. Subject to Court approval, the Trustee intends to enter into the Occupancy Agreement
with the Receiver, whereby:
the Trustee will authorize the Receiver to occupy the Company’s leased
premises for a period not to exceed three months from the date of bankruptcy;
and
during the occupancy period, the Receiver will pay and indemnify the Trustee
for all occupancy costs and expenses for which the Trustee has liability in
connection with the Company’s leased premises.
4. A copy of the proposed Occupancy Agreement is attached as Appendix “C”.
5. The Trustee is of the view that the Occupancy Agreement is appropriate and that no
stakeholder is prejudiced by its terms. Accordingly, the Trustee recommends that the
Court authorize it to enter into the Occupancy Agreement with the Receiver.
5.0 Conclusion and Recommendation
1. Based on the foregoing, the Trustee respectfully recommends that this Honourable
Court make an order granting the relief detailed in Section 1.1(1)(c) of this Report.
* * *
All of which is respectfully submitted,
KSV KOFMAN INC.
IN ITS CAPACITY AS TRUSTEE IN BANKRUPTCY OF
DANIER LEATHER INC.
AND NOT IN ITS PERSONAL CAPACITY
Appendix “A”
Appendix “B”
Danier Leather Inc.
Summary of Leases
As at March 23, 2016
Store #
Property Name
Property Address
002
FAIRVIEW MALL
1800 SHEPPARD AVENUE EAST, TORONTO
ON
004
MAPLEVIEW MALL
900 MAPLE AVENUE, BURLINGTON
ON
006
PROMENADE SHOPPING CENTRE
1 PROMENADE CIRCLE, THORNHILL
ON
007
FAIRVIEW PARK MALL
2960 KINGSWAY DRIVE, KITCHENER
ON
008
OSHAWA SHOPPING CENTRE
419 KING STREET WEST, OSHAWA
ON
009
TORONTO EATON CENTRE
220 YONGE STREET, TORONTO
ON
010
WHITE OAKS MALL
1105 WELLINGTON RD., LONDON
ON
011
PEN CENTRE
221 GLENDALE AVENUE, ST. CATHARINES
ON
012
SCARBOROUGH TOWN CENTRE
300 BOROUGH DRIVE, SCARBOROUGH
ON
013
SQUARE ONE SHOPPING CENTRE
100 CITY CENTRE DRIVE, MISSISSAUGA
ON
014
DEVONSHIRE MALL
3100 HOWARD AVENUE, WINDSOR
ON
015
OAKVILLE PLACE SHOPPING CENTRE
240 LEIGHLAND AVE., OAKVILLE
ON
016
ST LAURENT SHOPPING CENTRE
1200 ST. LAURENT BLVD., OTTAWA
ON
017
CARREFOUR LAVAL
3003 LE CARREFOUR BLVD, LAVAL
PQ
018
LIMERIDGE MALL
999 UPPER WENTWORTH STREET, HAMILTON
ON
019
BAYSHORE SHOPPING CENTRE
100 BAYSHORE DRIVE, OTTAWA
ON
021
RIDEAU CENTRE
50 RIDEAU STREET, OTTAWA
ON
022
MASONVILLE PLACE SHOPPING CENTRE
1680 RICHMOND STREET N., LONDON
ON
025
MICMAC MALL
21 MICMAC BLVD., HALIFAX
NS
026
PLACE VILLE MARIE
1 PLACE VILLE MARIE, MONTREAL
PQ
027
YORKDALE SHOPPING CENTRE
3401 DUFFERIN STREET, TORONTO
ON
028
FAIRVIEW POINTE CLAIRE
6801 TRANS CANADA HIGHWAY
PQ
029
SHERWAY GARDENS SHOPPING CENTRE
25 THE WEST MALL, TORONTO
ON
031
ERIN MILLS SHOPPING CENTRE
5100 ERIN MILLS PARKWAY, MISSISSAUGA
ON
035
RICHMOND CENTRE
6551 NO. 3 ROAD, RICHMOND
BC
037
METROPOLIS AT METROTOWN
4720 KINGSWAY, BURNABY
BC
040
MAYFAIR SHOPPING CENTRE
3147 DOUGLAS STREET, VICTORIA
BC
041
ROBSON STREET
1018 ROBSON STREET, VANCOUVER
BC
042
LES PROMENADE ST-BRUNO
1 BLVD DES PROMENADES, SAINT BRUNO
PQ
043
ORCHARD PARK SHOPPING CENTRE
2271 HARVEY AVE., KELOWNA
BC
044
UPPER CANADA MALL
17600 YONGE STREET, NEWMARKET
ON
048
WOODGROVE CENTRE
6631 ISLAND HIGHWAY NORTH, NANAIMO
BC
049
SOUTHCENTRE MALL
100 ANDERSON RD. S.E., CALGARY
AB
050
ST VITAL SHOPPING CENTRE
1225 ST MARY'S ROAD, WINNIPEG
MB
051
MARKET MALL
3625 SHAGNAPPI TRAIL, CALGARY
AB
053
EDMONTON CITY CENTRE
10025 - 102 A AVENUE, EDMONTON
AB
055
WEST EDMONTON MALL
8882 - 170 ST, EDMONTON
AB
056
CORNWALL CENTRE
2102 - AA AVENUE, REGINA
SK
057
CHINOOK CENTRE
6455 MACLEOD TRAIL SE, CALGARY
AB
058
POLO PARK SHOPPING CENTRE
1485 PORTAGE AVENUE, WINNIPEG
MB
062
CHAMPLAIN PLACE
477 PAUL STREET, DIEPPE
NB
063
EGLINTON TOWN CENTRE
22 LEBOVIC AVE., TORONTO
ON
065
CANADA ONE FACTORY OUTLETS
7500 LUNDY'S LANE, NIAGARA FALLS
ON
066
THE CORNER
6070 - 200TH STREET, LANGLEY
BC
069
MEADOWLANDS CENTRE
821 GOLF LINKS RD., ANCASTER
ON
070
HEARTLAND TOWN CENTRE
5950 RODEO DRIVE, MISSISSAUGA
ON
071
BAYERS LAKE SHOPPING CENTRE
198 CHAIN LAKE DRIVE, HALIFAX
NS
072
WOODSIDE SHOPPING CENTRE
3175 HIGHWAY 7, MARKHAM
ON
074
SIGNAL HILL SHOPPING CENTRE
5643 SIGNAL HILL CENTRE S.W., CALGARY
AB
Danier Leather Inc.
Summary of Leases
As at March 23, 2016
Store #
Property Name
Property Address
076
DURHAM CENTRE
90 KINGSTON ROAD E, AJAX
ON
077
SOUTH KEYS SHOPPING CENTRE
2210 BANK STREET, OTTAWA
ON
078
WESTRIDGE SHOPPING CENTRE
3900 HIGHWAY 7 WEST, WOODBRIDGE
ON
081
BRIDGECAM SHOPPING CENTRE
30 PINEBUSH ROAD, CAMBRIDGE
ON
082
TRINITY COMMON
190 GREAT LAKES DRIVE, BRAMPTON
ON
086
LINDENWOODS SHOPPING CENTRE
1585 KENASTON BLVD, WINNIPEG
MB
087
LOUGHEED SUPER CENTRE
101 SCHOOLHOUSE STREET, COQUITLAM
BC
089
MARCHE CENTRAL
999 RUE DE MARCHE CENTRAL, MONTREAL
PQ
104
QUINTE MALL
390 NORTH FRONT STREET, BELLEVILLE
ON
106
TD CENTRE
66 WELLINGTON STREET W., TORONTO
ON
108
GALLERIES D'ANJOU
7999 BOULEVARD LES GALARIES D'ANJOU, MONTREAL
PQ
110
FALLSVIEW CASINO SHOPS
6380 FALLSVIEW BLVD, NIAGARA FALLS
ON
113
CRYSTAL LODGE
4154 VILLAGE GREEN, WHISTLER
BC
114
DIXIE OUTLET MALL
1250 SOUTH SERVICE ROAD, MISSISSAUGA
ON
115
CATARAQUI TOWN CENTRE
945 GARDINERS ROAD, KINGSTON
ON
117
NEW SUDBURY CENTRE
1349 LASALLE BLVD, SUDBURY
ON
119
PICKERING TOWN CENTRE
1355 KINGSTON ROAD, PICKERING
ON
120
LANSDOWNE PLACE
645 LANSDOWNE ST SE, PETERBOROUGH
ON
121
GUILDFORD TOWN CENTRE
10355 152 STREET, SURREY
BC
122
TORONTO PREMIUM OUTLETS
13850 STEELES AVE WEST, HALTON HILLS
ON
123
OUTLET COLLECTION AT NIAGARA
300 TAYLOR ROAD, NIAGARA ON THE LAKE
ON
124
TANGER OUTLETS OTTAWA
8555 CAMPEAU DRIVE, OTTAWA
ON
125
MONTREAL PREMIUM OUTLETS
19001 CHEMIN NOTRE-DAME, MIRABEL
PQ
151
CROSSROADS OUTLET
1592 REGENT AVE, WINNIPEG
MB
159
VAUGHAN MILLS SHOPPING CENTRE
1 BASS PRO MILLS DRIVE, VAUGHAN
ON
161
BEACON HILL SHOPPING CENTRE
11854 SARCEE TRAIL NW, CALGARY
AB
162
SOUTH EDMONTON COMMON
1420PARSONS ROAD NW, EDMONTON
AB
163
CROSSIRON MILLS
261055 CROSSIRON BLVD, ROCKY VIEW
AB
164
AVALON MALL
48 KENMOUNT RD, ST. JOHN'S
NL
165
TANGER OUTLETS COOKSTOWN
3311 SIMCOE RD 89, COOKSTOWN
ON
166
MEGA CENTRE VAUDREUIL
3120 BOULEVARD DE LA GARE, VAUDREUIL
PQ
Distribution Centre
SAMOR
53 SAMOR ROARD, TORONTO
ON
Head Office
HEAD OFFICE
2650 ST. CLAIR AVENUE WEST, TORONTO
ON
Appendix “C”
ESTATE FILE NO.: 31-2084381
COURT FILE NO.: 31-2084381
ONTARIO
SUPERIOR COURT OF JUSTICE
(Commercial List)
Proceeding commenced at Toronto
FIRST REPORT OF THE TRUSTEE
MARCH 23, 2016
BENNETT JONES LLP
3400 One First Canadian Place
Toronto, ON M5X 1A4
Sean Zweig (LSUC #57307I)
Tel: (416) 777-6254
Fax: (416) 863-1716
Counsel to the Trustee, KSV Kofman Inc.