On January 24, 2025, the parent company of True North Cannabis Co., as well as Bamboo Blaze, and real estate holding company 888 filed for creditor protection for the three businesses.
Overview and initial Court Orders
The Vancor Group Inc. made an application under the Companies’ Creditors Arrangement Act (CCAA) declaring that 2744364 Ontario Limited (operating as True North Cannabis Co.), 2668905 Ontario Limited (operating as Bamboo Blaze), and 2767888 Ontario Inc. (888, a real estate holding company) are debtor companies to which the CCAA applies.
On the same day, the Ontario Superior Court of Justice granted an Initial Order mandating a stay of proceedings up to and including February 3, 2025, and also appointed Deloitte Restructuring Inc. as the Court-appointed monitor of the debtors’ business and financial affairs.
This is a creditor-initiated application brought by Vancor, the largest creditor of the debtor companies. Vancor has provided more than $23 million in principal over four years on an unsecured basis. The Vancor Group is owned by Corry Van Iersel, who owns the True North Cannabis chain of stores.
The CCAA filing is said to be “necessary and urgently required” because the debtors’ debt will mature on May 1, 2025. Vancor’s unsecured debt is also due and payable, and no means of repayment is available.
A court-supervised process is therefore seen by the debtors as the most likely way for the companies to find an investor or buyer and ensure the preservation of 285 employees, all working at True North, and preserve services to its customers and supply relationships with vendors.
Six True North employees also perform tasks for Bamboo Blaze and 888. Of the 285 employees, 106 are full-time, while another 179 are part-time.
Creditor protection is also “strategically essential” because secured loans that are imminently due are collateralized by mortgages on 27 of the debtors’ properties.
True North Cannabis Co. operates 48 retail cannabis stores in Ontario, an online storefront, and direct-to-consumer sales and deliveries in Ontario.
Bambloo Blaze supplies personal protective equipment like masks, gowns, and gloves to cannabis producers, and accessories like grinders, rolling papers, and bongs to cannabis retailers, including True North.
The holding company 888 owns 41 properties and is the landlord of the majority of True North’s 40 locations.
Financial status and creditor obligations
True North lists $21.4 million in unsecured creditors. Bamboo Blaze lists $3.3 million in unsecured credit, and 888 lists $6.4 million. Meanwhile, 888 lists $14.1 million in secured creditors, for a total of $31.1 million and a grand total of $45.2 million combined.
As of January 23, the debtor companies had eight secured creditors. Company 888 has 26 outstanding mortgages, all of which are due on May 1, 2025, to secure a $10 million principal loan. 888 currently owes around $7.5 million to the company behind the principal loan, Firm Capital.
In addition, on January 8, Cory Van Iersel received a demand narrative from a person, Venizelo Anastasiadis, who is pursuing a vendor take-back loan to True North in connection with True North’s directors’, Van Iersel and Alena Hapanovich, acquisition of True North.
According to Van Iersel, court filings describe a breakdown of the relationship between these two directors in 2024 due to disagreements about finances.
Vancor seeks the appointment of Shawn Dym as Chief Revenue Officer of the debtor companies. Dym is the owner of Decibel Cannabis Co and an advisor to Green Acre Capital. Calgary-based Decibel Cannabis closed on its acquisition of AgMedica Bioscience Ltd., a subsidiary of Atlas Global Brands, in October 2024.
According to court records, True North buys nearly $1 million worth of inventory from the Ontario Cannabis Store per week. As of November 30, 2024, True North had assets totalling around $15.8 million, consisting of around $7.5 million in current assets (inventory, cash, etc.) and $8.6 million in non-current assets (property and equipment).
As of the same date, True North also had around $25.3 million in liabilities, consisting of around $4.7 million in current liabilities and $20.6 million in non-current liabilities.
As of January 19, 2025, Bamboo Blaze had around $2.7 million in current assets, all in accounts receivable and inventory. As of December 31, 2024, 888 had assets of around $19.2 million, consisting of around $121,000 in current assets and around $19 million in non-current assets.
A 15-week cash flow forecast estimates that the debtor will need up to $1.5 million in interim financing.
Court records state that True North owes over $500,000 in HST arrears, while 888 is $100,000 behind in its HST obligations.
The Vancor Group is owned by Corry Van Iersel, who owns True North Cannabis. The Vancor Group is also the largest creditor of Equipment Co., the parent cannabis processor of Galaxie Brands. The parent company of cannabis packager Galaxie Brands was also issued an order pursuant to CCAA on August 6 on application by The Vancor Group Inc.
Prior to filing CCAA, Van Iersel was the owner of 51% of a numbered company, 1000460404 Ontario Inc. (10004), which in turn owns 50% of another numbered company, 1000370759 Ontario Inc. (10003), which owns Galaxie Brands Corporation. Court documents state that Galaxie has sales of around $1.5 million a month. Galaxie currently supplies 16% of the cannabis products sold in all True North retail stores.
Ken Schaller is a director, officer and 50% shareholder of 2767889, Bamboo Blaze, Vancor and Jax Jungle, a 30% shareholder of numbered company 2767888 and holds 15% of shares in 10004, which in turn owns 50% of 10003. He is also the common law spouse of Alena Hapanovich.
In the record of the applicant, it is claimed that Schaller has said that “he doesn’t care if the taxes get paid,” noting that Galaxie owes $2.7 million in excess taxes, an amount which is said to be increasing weekly.
The record of the applicant also makes several other accusations against Schaller, especially regarding his actions at Galaxie, including allegedly questionable hiring and firing practices and threats against Van Iersel. For his part, Schaller denies these and other allegations, saying they were made “without foundation in fact or evidence,” and making his own counterclaims.
Those counterclaims include a request for a declaration that Van Iersel breached duties owed by him as an officer and director of the corporations to the plaintiffs.
Court-authorized payments and borrowing
In accordance with the cash flow forecast appended to the company’s pre-filing report, the initial court order posted on January 24 states that debtor companies “shall be entitled but not required to pay”:
(a) all outstanding and future wages, salaries, employee and pension benefits, and vacation pay payable on or after the date of this Order, in each case incurred in the ordinary course of business and consistent with existing compensation policies and arrangements;
(b) the fees and disbursements of any assistants retained or employed by the debtors in respect of these proceedings, at their standard rates and charges;
(c) principal and/or interest payable to its secured creditors, and
(d) with the consent of the monitor, amounts owing for goods actually supplied to the debtors prior to the date of this order by the Ontario Cannabis Store but not yet paid for.
The court also ordered that the three debtors shall remit, in accordance with legal requirements, or pay:
(a) any statutory deemed trust amounts in favour of the Crown in right of Canada or of any Province thereof or any other taxation authority which are required to be deducted from employees’ wages, including, without limitation, amounts in respect of (i) employment insurance, (ii) Canada Pension Plan, (iii) Quebec Pension Plan, and (iv) income taxes;
(b) all goods and services or other applicable sales taxes (collectively, “Sales Taxes”) required to be remitted by the debtors in connection with the sale of goods and services by the debtors, but only where such sales taxes are accrued or collected after the date of the January 24 order, or where such sales taxes were accrued or collected prior to the date of the order but not required to be remitted until on or after the date of the order; and
(c) any amount payable to the Crown in right of Canada or of any province thereof or any political subdivision thereof or any other taxation authority in respect of municipal realty, municipal business or other taxes, assessments or levies of any nature or kind which are entitled at law to be paid in priority to claims of secured creditors and which are attributable to or in respect of the carrying on of the business by the debtors.
The court has also ordered that the debtors are authorized and empowered to obtain and borrow, on a joint and several basis, under the debtor-in-possession term sheet, provided that borrowings under the DIP term sheet shall not exceed $900,000 plus interest, fees and expenses, unless permitted by further order of the court.
