Lobster market shift forces South Shore Seafood to restructure
Bloomfield, Prince Edward Island, Canada-based South Shore Seafoods and several of its subsidiaries have been allowed to continue operating as a court-appointed restructuring firm decides the best way it can pay off millions in unpaid debt.
South Shore Seafoods and its subsidiaries – Captain Cooke’s Seafood, By the Water Shellfish, South Shore Seafoods International, Can-Am Lobster and Shellfish, Bridge Lobsters Limited, and Arsenault’s Fish Mart – were hit by a court order on 21 September after Toronto-Dominion Bank (TD Bank) filed requests for action to repay debt the companies have repeatedly defaulted on. The court subsequently appointed Deloitte Restructuring to begin determining how best to pay off the company’s debt, which amounts to over CAD 56 million (USD 41 million, EUR 39 million).
In filings in the Court of King’s Bench of New Brunswick Trial Division, the company was revealed to owe over CAD 26 million (USD 19.2 million, EUR 18.1 million) in principle in outstanding secured loans and guaranteed obligations to TD Bank. According to the initial application by the bank, South Shore Seafoods, its subsidiaries, and the owners Michel Jacob and Timothy Williston “have been in default of a number of their obligations” that had already forced the company into a forbearance agreement on 2 May, 2023.
The trouble for the lobster processing and supply began, according to court documents, in fiscal year 2022, after declining market conditions left the company in a poor position.
Prior to the downturn, from FY 2020 to FY 2022, the company – through the acquisition of Captain Cooke’s Seafood, Can-Am Lobster, and By The Water – achieved significant revenue growth, increasing from roughly CAD 78.6 million (USD 58 million, EUR 55 million) in revenue in FY 2020 to CAD 297.2 million (USD 219 million, EUR 207 million) in FY 2022. That revenue was coupled with increased earnings before interest, taxes, depreciation, and amortization (EBITDA), which went from CAD 4.4 million (USD 3.2 million, EUR 3 million) in FY 2020 to CAD 7.8 million (USD 5.7 million, EUR 5.4 million) in FY 2022.
However, soon after the acquisitions the price of lobster plunged due to economic factors, and according to the court documents, South Shore was left holding huge amounts expensive inventory.
“At the time of the market change, the debtors were holding approximately CAD 30 million [USD 22 million, EUR 21 million] worth of inventory, approximately 80 percent of which was frozen product susceptible to the declining market conditions,” a pre-filing report from 18 September states.
The result, according to the filing, was a 50 percent decline in EBITDA between 31 October, 2021, and 28 February, 2022.
Soon after, in May, South Shore and TD Bank agreed to convert the company’s financial arrangement to provide increased access to working capital “during a period when market prices remained depressed.” However by October 2022, the South Shore Seafoods “realized the severity of their liquidity constraints” and soon after had to curtail operations, forcing the company to skip the Southwest Nova Scotia lobster season.
Under continued financial constraints, South Shore Seafood turned to ...
Photo courtesy of South Shore Seafoods