Certain isolated legacy issues remaining from TravelBrands' acquisition of Thomas Cook Canada Inc. in 2013 have forced the company to obtain creditor protection, according to a release.
The company has obtained an Order from the Ontario Superior Court of Justice (Commercial Division) granting it creditor protection under the Companies’ Creditors Arrangement Act (CCAA), providing the necessary time and stability to restructure certain areas of its business.
"After acquiring what was then Thomas Cook Canada Inc., the company made significant efforts to address challenges associated with the business – and has been largely successful," the release states. "There are certain remaining isolated legacy issues that are significantly impacting TravelBrands’ financial performance that can only be sufficiently addressed within the confines of CCAA legislation."
According to a description by PwC, "the CCAA is a Federal Act that allows financially troubled corporations the opportunity to restructure their affairs. By allowing the company to restructure its financial affairs, through a formal Plan of Arrangement, the CCAA presents an opportunity for the company to avoid bankruptcy and allows the creditors to receive some form of payment for amounts owing to them by the company.
"The CCAA is restricted to larger corporations, as a corporation must have amounts owing to creditors in excess of $5 million to be eligible to use the Act."
Acknowledging potential concerns from partners, Chief Executive Officer Frank DeMarinis assured that customers are not affected by this announcement.
“Our wholesale and retail brands remain open for business and there will be absolutely no change to the service and support our customers have come to expect from us," he said. "As far as our external partners are concerned, it’s business as usual.”
The release states that TravelBrands – which "has sufficient cash to continue operations as usual under CCAA protection" – has liaised with the various regulatory bodies to ensure that they are aware of the developments.
“TravelBrands enters CCAA with the support of its creditors and investors,” DeMarinis said. "We will emerge from creditor protection financially stronger, more competitive and well-positioned for the future."
Under the Initial Order, among other things, TravelBrands was granted a stay of proceedings, staying creditor claims against the Company and its subsidiaries during the CCAA process. KPMG has been appointed by the Court as the monitor in the proceedings.
The Stay of Proceedings granted under the Initial Order will last for 30 days, although the company may apply for an extension in the normal course and at any point during the 30-day period. Additional information regarding the Company’s CCAA proceedings, including court materials, will be made publicly available on the Monitor’s website here.
TravelBrands will provide further updates throughout its restructuring process.