How did the owner of Buca, La Banane and Jacobs rack up $46 million in debt? (including nearly $100,000 for mushrooms)

When Luc Lafontaine, owner of the pub-brewery Godspeed, decided to sell some of his beer to La Banane, he thought it was a good choice.

A stylish restaurant with a top chef serving classic French cuisine would be a great place to showcase the Belgian-style saison flavored with Japanese citrus yuzu, or the classic Czech-style lager brewed in its eastern brewpub.

“We thought it would be a good place to have our beer,” Lafontaine said.

Now, as he reflects on the $1,139 he owes him King Street Food Group, the parent company of La Banane, Lafontaine regrets the decision.

“They haven’t paid us anything since last November. It’s frustrating, but we’re going to have to cancel this,” he said.

King Street Food Group was granted protection from its creditors on November 6. As the hospitality company goes through the insolvency process, with eyes on a potential sale of all or part of the business, Godspeed is just one of many businesses, organizations and individuals that owe money.

In court filings earlier this month, KSF Group said it owed a total of $45.8 million, with $23.4 million in assets. The company, which owns a chocolate factory and eight restaurants, including La Banane, upscale steak house Jacobs, several Buca locations and two of celebrity chef Jamie Oliver’s “Jamie’s Italian” restaurants, said between April and September – under COVID-related restrictions – revenues were down 98% compared to the same period last year.

“The COVID-19 pandemic has led the KSF Group to face unexpected and staggering financial difficulties,” KSF co-owner Peter Tsebelis said in an affidavit filed in Ontario Superior Court.

Tsebelis also said a planned expansion – eight more restaurants over the next three years – and Jamie’s Italian underperformance also hurt the company’s finances.

“Prior to the COVID-19 pandemic, the KSF Group’s expansion and construction costs, as well as the unforeseen losses incurred by JI Yorkdale and JI Square One, placed significant pressure on the group’s working capital and liquidity. KSF,” Tsebelis said in the affidavit.

While the largest amount on the creditors’ list is $34,943,688 in secured debt owed to Third Eye Capital Corp., the vast majority of creditors listed by MNP Insolvency Trustee are small businesses or individuals. (The Receiver General for Canada owes $2.5 million in HST payments).

They range from $700, owed to a Toronto knife sharpener, to hundreds of thousands of dollars owed to several wine agents.

Dozens of meat, produce and other food purveyors are also on the list, including Woodword Meat Purveyors, which supplied the eight King Street restaurants with premium beef, including prized American Wagyu beef sold at Jacobs.

A photographer owes $4,294. A supplier of mushrooms $97,000. Even high profile crisis communications firm Navigator Ltd. owes $24,973 (asked about its appearance on the list of creditors, a Navigator source said the company does not comment on clients’ work).

Veteran Toronto restaurateur Arron Barberian, owner of Barberian’s Steakhouse and co-owner of a wine importing agency to whom KSF owes money, said he feels for all petty creditors.

Many have been unwilling to speak with the Star on record, as they do not want to jeopardize their chance to collect the money owed to them.

“I’m in this weird position where I have to be ‘yay, Buca’ because the only hope I have of seeing any money coming out of this is if they can somehow make the things again,” said one.

Another said the debt owed to him by KSF had been outstanding for more than a year.

As unsecured creditors, these small businesses and individuals will likely get pennies on the dollar — if any — if MNP finds a buyer for part or all of KSF, experts say.

“The lion’s share of the proceeds would go to the secured creditor. Unsecured creditors usually don’t get much,” said Bryan Gelman, managing director of Albert Gelman, a licensed insolvency firm.

Gelman says a buyer probably wouldn’t end up taking the whole business.

“The buyer may be looking to choose profitable locations and leave unprofitable ones. They could become a small business,” Gelman said, adding that any sale would have to be approved by Third Eye Capital, as well as by a judge.

Gelman, who is not working on KSF’s insolvency, said it might seem unfair for a big lender to receive the bulk of the proceeds, but says smaller businesses and individuals simply don’t have a lot of money. weight.

“The reality is that a lender who can give a company $33 million in a risky business is rare. A product supplier or wine import agent is not as rare. So the lender has more There’s no leverage for these small providers,” Gelman said.

The insolvency of a restaurant business has a ripple effect on these small suppliers and their staff, said Steve Bamford, president of the Toronto Wholesale Produce Association.

“It’s depressing. Because you end up paying for the food they sold to someone else, and there’s not really much you can do about it,” said Bamford, who noticed that many many food companies that supply restaurants are struggling during COVID.

“They have a lot less people. Sometimes the business owner ends up driving the truck because he had to let everyone go,” Bamford said.

It’s easy to focus on one restaurant or big business when it goes bankrupt, but there are many more businesses and people affected than the big names, said Ryan Mallough of the Canadian Federation of independent business.

“People are focused on closing the restaurant, but it’s a whole supply chain that’s affected. There’s the meat supplier, the cheese supplier, the produce seller, the mushroom seller, the electrician. Most of the time, they have already done the work or supplied the product,” Mallough said.


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