OTTAWA – Insolvency was an increasing concern across the board of the economy in 2024, a report from the Insolvency Insider, which provides updates on Canadian Insolvency filings and new reveals.
Cannabis companies with 22 filings, retail with 17 and real estate with 70 have been particularly hard hit, and of the 139 filings posted across the country, 39 were in B.C. Ontario led the way with 136.
Leanne Williams of Thornton Grout Finnigan LLP notes that besides real estate and cannabis, “The transportation and logistics industry was also hit hard in 2024. When a particular industry struggles, it creates a domino effect for some and opportunities for others. For example, in the cannabis sector, certain well-capitalized industry players have been able to take advantage of their struggling competitors with unique assets to complement their portfolio.”
Howard Steinberg of Steinberg Advisory Corp. states that “Notably, real estate remains the most impacted sector while others who have been holding on for sunnier skies are starting to realize the light at the end of the tunnel is a train heading straight for them. While this has been true for some time in cannabis, with 2024 being no exception, it appears the tide is slowly turning for those that have figured out a way to thread the needle leaving behind those with questionable management.”
Doane Grant Thornton’s Jon Krieger notes that significant challenges have been observed in trucking/logistics, office real estate, and sectors that are heavily dependent on new capital (mining, start up technology, etc.).
“Surprisingly, certain sectors which historically have been challenged in a weak economy (retail, automotive) have been resilient despite softening consumer sentiment,” Krieger adds. “Also different than previous downturns, there still appears to be significant available capital from investors seeking the right opportunities.”
Along with that, Peter Bychawski of Blakes has noticed a marked increase in lender assertiveness in 2024.
“This is likely attributable to the fact that many lenders had in recent years demonstrated restraint in dealing with struggling borrowers (with the number of forbearance agreement amendments in the double digits not being uncommon),” he says. “As an example, throughout 2024 more lenders have sought to establish control over insolvent debtors including the conduct of their insolvency proceedings.”
Bobby Kofman and David Sieradzki of KSV state that in 2024, their practice experienced a disproportionate number of fraud situations.
“We are involved in these mandates not only in the real estate sector, but also in the restaurant and film industries. It may be that ‘desperate times call for desperate measures’, but particularly in the real estate sector, ‘Ponzi schemes’ are typically only exposed in a downturn when new investor funds dry up, so that old debt can no longer be serviced.”
In addition to Ponzi schemes, their firm has active fraud mandates involving falsification of borrowing base certificates and financial statement misrepresentation.
CBRE noticed more overall activity in distressed real estate sales in 2024, as lenders and receivers became more creative in regards to deal structure in order to increase the number of prospective purchasers and maximize pricing.
Michael McTaggart of PwC (Price Waterhouse Cooper) found the decline of Red Lobster restaurants in the U.S. very interesting, and wonders if it could portend to future struggles in Canada.
“There are some great articles on the decline of Red Lobster and it has all the elements of a classic case study. It seemed that in the US the restaurant industry faced significant headwinds in 2024,” he muses. “I was reading one article that said over 30 restaurant chains or large franchisees in the U.S. ended up in some sort of creditor protection headlined by TGI Fridays, Red Lobster and BurgerFi. I don’t believe we saw that same trend in Canada but you have to wonder if the issues facing the US industry will eventually find their way up to the Canadian market.”
2025 is likely also to be busy for insolvency firms, due to tightening credit markets, still too high interest rates and economic uncertainty.
Kyle Kashuba of Torys observes that “It doesn’t take an expert to commentate on the state of the Canadian economy and some of the risks and ongoing developments that come along with it. Let’s also not forget (as if we could) the fallout of the US election, and the pending tariff battles that our country is facing.
“I’m expecting a serious uptick in insolvency filings, driven by persistent high interest rates and upcoming debt maturities. Industries with over-leveraged companies are particularly vulnerable.”
The real estate industry should be fairly active, as Bobby Kofman and David Sieradzki of KSV see that the “real estate sector is exceedingly active, we are seeing significant activity across the board from coast-to-coast, from technology, to media, oil and gas, and automotive, just to name a few.”
Steinberg forecasts that the restructuring landscape in 2025 “is expected to remain active, driven by high interest rates, tightening credit markets, and slowing economic growth. Real estate will face continued challenges with refinancing and declining valuations, while retail, particularly big-ticket and discretionary sectors, will grapple with demand softness. “Technology, cannabis and manufacturing will see heightened restructuring activity due to valuation recalibrations, market saturation, and commodity volatility, respectively.”
Business Examiner Staff
