In a dramatic move aimed at safeguarding its U.S. subsidiaries, Canadian textile juggernaut Duvaltex Group has approached a Delaware bankruptcy judge, seeking recognition of its insolvency proceedings unfolding in Canada. The company faces a staggering $88.1 million debt burden and is grappling with a precipitous decline in demand for its office furnishing products, compounded by debts stemming from strategic acquisitions.
Canadian textile Seeks US Recognition For Bankruptcy : Struggling Amidst Turbulent Tides
Quebec-based Duvaltex filed proceedings under Canada’s Companies’ Creditors Arrangement Act just last week, as it contends with unforeseen challenges in the market and endeavors to navigate through financial turbulence. The tumultuous landscape is marked by a downturn in demand for its office furnishing products, coupled with mounting debts incurred from acquisitions, including the acquisition of a key American manufacturing subsidiary.
U.S. Operations in the Crossfire
Duvaltex currently oversees four U.S. manufacturing plants through its subsidiary, presently in the process of closure. Unexpected hurdles and costs in transferring manufacturing operations to the company’s Canadian facilities have further exacerbated the crisis, as the textile giant grapples with the intricacies of the insolvency filing.
Canadian textile Seeks US Recognition For Bankruptcy : A Tapestry of Challenges
Founded in 1947 as a blanket manufacturer, Duvaltex’s metamorphosis into a major player in office furniture products has taken a toll. CEO Alain Duval, in a Chapter 15 declaration, revealed that a staggering 90% of sales in 2020 were in office furniture, primarily to the U.S. market. The acquisition of True Textiles Inc. in 2016, with manufacturing plants in Maine and Michigan, added complexity, as did a 2019 venture into N95 mask production during the pandemic, ultimately abandoned after a $15 million investment.
Unraveling Financial Threads
The pandemic-induced contraction of the office furnishings market has left Duvaltex with sales plummeting by 30% from pre-pandemic levels. Efforts to shutter U.S. plants and migrate operations to Canada have proven arduous and costly due to a dearth of skilled labor in Quebec. One Maine plant has closed, with the other in the process, both unsold and incurring maintenance costs.
Canadian textile Seeks US Recognition For Bankruptcy : Debt Avalanche
The company, burdened by approximately $29 million in debt from acquisitions, faces an unsustainable liquidity crisis. High debt service, dwindling sales, and escalating production costs have created a perfect storm, compelling Duvaltex to seek refuge through the bankruptcy filing.
Current Financial Landscape
Duvaltex’s court filings outline just under $56.4 million in secured debt to Canadian and U.S. lenders, coupled with nearly $10.2 million in trade debt, along with other liabilities.
Legal Maneuvers
Lavery de Billy LLP will represent Duvaltex in the Canadian proceedings, with Ernst & Young Inc. appointed by the Canadian court to serve as the monitor. In the U.S., Duvaltex is represented by Laura S. Bouyea, Darek S. Bushnaq, Mariaelena Gayo-Guitian, and Heather L. Harmon of Venable LLP.
