The Quebec government lost $37.2 million in the restructuring that helped shoe giant Aldo avoid bankruptcy.
• Also read: Aldo restructuring officially completed
In 2014, Prime Minister Pauline Marois announced the award of a $40 million interest-free loan and two grants totaling $12 million to Aldo. The aid concerned the purchase of software and computers to enable the company to better sell its products online.
However, the difficult implementation of the IT modernization project and Aldo’s drop in sales plunged the company into a financial crisis. The situation, made worse by the pandemic, forced Aldo to take shelter from his creditors in May 2020.
With more than $600 million in debt, the company had to close 266 of its 715 stores and lay off 600 employees, half of them at its Montreal headquarters.
crumbs for believers
As part of a settlement plan unveiled in April, Aldo agreed to repay the $278 million it owes its bankers over seven years. Other creditors received barely 6% of the amount the company owed them (the percentage was higher for those with claims of $83,000 or less).
The Quebec Department of Commerce believed it could recover its entire $40 million loan because it was guaranteed by software from Aldo.
However, the company argued, based on a report by accounting firm KPMG, that those assets were only worth $3.3 million. The government responded by ordering a report from Deloitte, which instead put it at $86 million.
Judge Michel Pinsonnault of the Supreme Court and Judge Marie-Josée Hogue of the Court of Appeal both sided with Aldo’s arguments.
To justify his decision, Judge Pinsonnault argued that the company would not have been able to repay the government without jeopardizing its recovery, which could have resulted in the loss of 4,350 jobs, including 1,150 in Quebec. In court, however, the government had pointed out that it was in no hurry to reimburse.
As a result, Quebec loses $34.5 million of its $40 million loan and a $2.7 million unsecured loan. For its part, the Federal Crown Corporation Export Development Canada (EDC) lost most of the $13.8 million that Aldo owed it.
He pays $28 million
Photo archive, Chantal Poirier
Aldo Bensadoun, founder of Aldo
The retailer’s founder, Aldo Bensadoun, paid just over $28 million to save it and keep it under control. The 80-year-old entrepreneur lost the $100 million he loaned the retailer.
Note that in 2017 Mr. Bensadoun donated $25 million to McGill University to start a retail management school that bears his name.
Additionally, his family foundation had more than $26 million in assets at the end of 2020, according to public data from the Canada Revenue Agency.
- Foundation, endowment : 1972
- Employees (2022): 5700
- Income (2019): $1.3 billion
- Operating loss (2019): $108 million