Le Chteau files for creditor protection, will shutter Canadian stores after six decades in business SUSAN KRASHINSKY ROBERTSON ITAUNG REPORTER + FOLLOW SUSAN PUBLISHED OCTOBER 2010 16 COMMENTS A A+ Voice LE CHATEAU SOLDE SOLDE TOP STORIES Apple's new Mac computers could revive the chip wars, analysts sy NOVEMBER Le Court wil header in the local Le Chteau Inc, the Canadian chain known for decades as a go-to purveyor of prom outfits and club wear, is shutting down after 6 years in business The Montreal-based clothing retailer is preparing to sell off inventory in liquidation sales and dose 123 stores across Canada. It is the latest Canadian retailer to file for creditor protection as the impact of the COVID-19 pandemic continues to pose challenges for the industry. The move will affect roughly 1,400 employees. The company announced on Friday that it has been granted protection under the Companies Creditors Arrangement Act (CCAA), in order to proceed with winding up its operations Le Chteau had been looking for alteratives in recent months, including trying to refinance its delst and looking for a buyer for its stores "The appetito today from financiers for retail, it's not great." Franco Rocchi, Le Chateau's senior vice president of sales and operations, said in an interview Friday. "Especially with the forecasts that we may not have a Christmas this season... With the cancellation of prome, of weddings, of summer festivals, the restaurant situation, the bar situation those all fed the demand for our product. That's what people came to us for. The retail traffic is not there, the traffic for dresses and occasion wear even less so Le Chateau was founded in 1959, on the eve of the youth revolution of the 1960s Founder Herschel Segal saw an opportunity in the changing fashion appetites of young people, selling bell bottoms to teengers and following the disco style trends of the seventies. It continued to expand through the eighties and nineties, providing accessibly priced fashion As the popularity of fast fashion grew with the arrival in Canada of brands such as Forever 21 and H&M Le Chateau began to focus on 25 to 45-year-old shoppers As part of a tuman und plan, Le Chateau closed roughly half its stores in the past five years at its peak, the chain had 243 locations and invested $10 million to improve its e-commerce platform The company was losing money even before the shock to the industry that resulted from TOP STORIES Apple's new Mac computers could revive the chipsy NOVEMBER Chester Care This Le Chateau announced in July that it was negotiating with its lenders and seeking new sources of financing. At the time, it reported camings and included a warning about material uncertainties that cast significant doubt upon the company's ability to continue as a going concern. Companies prepare earnings reports on the assumption they will remain in business as a "going concern." If there is meaningful doubt about that they or their auditors are required to tell shareholders. This warning caused Le Chateau to default on some of the covenants undera 570-million revolving credit facility and a $15-million loan. The company was scheduled to hold its annual general meeting of shareholders on Thursday morning, but cancelled it the day before. Le Chateau stores will remain open through its liquidation Other clothing retailers have been struggling Other shopping mall staples, Reitmans Canada Ltd. and Aldo Group both filed for creditor protection in May; and Laura's Shoppe Inc. which operates the Laura and Melanie Lyne banners, filed in July, Clothing chain Frank and Oak began restructuring in June, and was recently sold to a New York based investment firm. All of those brands are based in Montreal, a hub of fashion retailing After an initial surge in consumer activity after lockdowns in the spring, Canadian retail sales growth has slowed. Retail sales grew just 04 per cent in August, according to Statistics Canada, which also gave a preliminary estimate this week saying that September sales were relatively unchanged. And clothing stores have been among the hardest hit with sales down 13.6 per cent in August compared with the prior year, according to Statscan. The Canadian apparel market had roughly $312 billion in sales last year, according to market research firm Trendex North America. Trendex president Randy Harris said in an interview on Friday that he expects by the end of 2020. clothing sales will have dropped 15 percent to 18 per cent compared with the prior year. "Retailers in the middle of the market - except for the fast fashion and the off price retailers (selling higher end brands at a discount -I think they all need to be worried." Mt Harris said. TOP STORIES en Maschine the PC dup was analysay Read the news story Le Chteau files for creditor protection, will shutter Canadian stores after six decades in business, published in the Globe and Mail on October 23, 2020 and answer the following questions based on the readings in the textbook: 1. Summarize the facts of the story and identify the main legal issue(s) raised in the article. 2. According to the article, Le Chateau has been granted protection from its creditors. What does this mean for its secured and unsecured creditors? 3. If you were advising Le Chateau, would you advise the company to a) seek protection under the CCAA, or b) to file for bankruptcy in the circumstances? Explain your answer by clearly comparing and contrasting the advantages and disadvantages of both options