davidstea to implement restructuring plan

A necessary evolution

We have announced that we are implementing a restructuring plan under the Companies’ Creditors Arrangement Act (the “CCAA”) in order to accelerate our transition to an online retailer and wholesaler of high-quality tea and accessories.

During the restructuring process, we will continue to operate our online business through our e-commerce platform at davidstea.com as well as our wholesale distribution channel, through which we sell a selection of DAVIDsTEA products in grocery stores and pharmacies across Canada.

You have long told us that we are your “happy place.” As always, we will continue to brighten your day with positivitea, while providing the customer experience you know and love through davidstea.com.

We are happy to talk tea or to simply just talk, thanks to our engaged customer service team who can be reached via customerservice@davidstea.com and on our online chat.

For more information on the implementation of our restructuring plan, please see the Releases section by clicking here.


Why has DAVIDsTEA placed itself under the protection of the CCAA in Canada and equivalent laws in the United States?

Like many other retailers, DAVIDsTEA has been operating in a challenging brick-and-mortar retail environment. Following a careful review of available options to stem the losses from our brick-and-mortar footprint, we determined that a formal restructuring process is the best option in the context of an increasingly challenging retail environment, further exacerbated by the COVID-19 pandemic.

Through a restructuring, we intend to create a leaner and more efficient DAVIDsTEA and accelerate our transition to an online retailer, focused on becoming the leading online purveyor of loose-leaf tea and accessories in North America, complemented by our growing wholesale business. We believe the transformation of our business model is necessary to position us for a return to profitability.

What is the CCAA?

The CCAA, or the Companies’ Creditors Arrangement Act, is a federal law in Canada that provides certain insolvent companies with an orderly and supervised means to restructure their businesses. While CCAA proceedings are often used to restructure or sell a business, they are also used as an orderly and efficient way to wind down operations.

The Initial Order granting CCAA protection establishes what is known as a ‘Stay of Proceedings’. The Stay of Proceedings prevents creditors from taking action against the company, its directors and officers and its assets. This allows the company to continue to manage the day-to-day operations of the business for the benefit of the company and its stakeholders while it seeks to address its restructuring or wind-down objectives in an orderly and efficient manner.

Is a company that files for protection under CCAA considered to be bankrupt?

No. While a company filing for CCAA is insolvent, meaning it has insufficient liquidity to continue to fund its operations and/or its liabilities are greater than its assets available to satisfy those liabilities, the company is not considered to be “bankrupt”. The stay of proceedings under the CCAA, among other things, prevents creditors from forcing the company into bankruptcy. For this reason, CCAA protection is sometimes referred to as ‘Bankruptcy Protection’.

What is the difference between a proceeding under the CCAA and a proceeding under the Bankruptcy and Insolvency Act?

While there are many differences between CCAA and ‘bankruptcy’ proceedings commenced under the Bankruptcy and Insolvency Act (BIA), the CCAA provides the company with greater flexibility and the ability to remain in control of its day-to-day operations during its proceedings under the supervision of the Court-appointed Monitor. The CCAA and the Initial Order will provide a framework within which DAVIDs TEA can effect a responsible, controlled and orderly restructuring or wind-down. In a bankruptcy under the BIA, the company loses control of its assets and operations. A trustee in bankruptcy is appointed to liquidate the assets and distribute any value to creditors.

Once the company is granted protection under CCAA, who is in charge?

The company’s board of directors and management team remain in control of the day-to-day operations of the business, under the supervision of the Court-appointed Monitor and subject to the specific requirements of the Initial Order made in the CCAA proceedings.

What is a Monitor?

The Monitor is appointed by, and serves as an officer of, the Court. The Monitor’s responsibilities are prescribed by the CCAA and by court orders (including the Initial Order), and include monitoring the company’s wind-down initiatives, assisting the company with the preparation of cash flow statements and other financial reporting, liaising with stakeholders, reporting to the Court from time to time on the progress of the CCAA proceedings and providing certain recommendations to the Court. In this case, PricewaterhouseCoopers Inc. (PwC) has been appointed as the Monitor. Professionals from PwC will be working with the company throughout the CCAA process.

Is there a public filing or disclosure required as part of filing for protection under CCAA?

Yes. Among other public documents filed with the Court, the company submits an application which, among other things, includes: a brief history of the company and an overview of its business; a description of the nature of its assets and liabilities; the reasons for its financial difficulties; and support for the relief being sought from the Court. Once the Initial Order is issued, the Monitor is required to notify known creditors and publish a public notice of the CCAA proceedings. The Monitor is also required to establish a website where materials relating to the CCAA proceedings will be posted. In addition to the Application and the application for a CCAA Initial Order, there may be applications filed with the Court from time to time during the CCAA proceedings and related Monitor’s reports that will further inform stakeholders as to the progress of the CCAA proceedings. These documents will be matters of public record and made available by the Monitor on its website at www.pwc.com/ca/davidstea.

Do I need to specifically request to receive any public Court documents?

No. Updates on key developments and Court materials, including reports prepared by the Monitor, will be available at the Monitor’s website at www.pwc.com/ca/davidstea and at ir.davidstea.com.

How long will this process take?

Unfortunately, it’s too early in the process to know for sure. However, the company is committed to moving as quickly as possible through these proceedings.

Will my contracts and agreements be honored?

The stay of proceedings, established by Court order, prohibits any contractual parties from ceasing to perform their contracts on account of the CCAA filing or there being any outstanding amounts due as of the filing. The company will be paying for any post-filing goods and services provided during the CCAA protection period. The parties to any contract that the company seeks to terminate (or “disclaim”), will receive formal notice from the company. Any remaining outstanding obligations under disclaimed contracts will be addressed through a Court-approved claims process.

I have outstanding invoices that haven’t been paid yet. Who do I speak to about getting those paid?

Unfortunately, the CCAA process prohibits the payment for any goods or services provided before the filing date. Claims on account of such outstanding invoices will be identified and quantified through a Court-approved claims process.
Once a claims process is formalized and approved by the Court through the granting of a claims process order, all creditors of record will receive notice from the Monitor regarding next steps. The claims process order will also be posted on the Monitor’s website at www.pwc.com/ca/davidstea. In the meantime, it’s important that any invoices yet to be submitted to the company be submitted through your normal channels.

Should I continue shipping product or providing services? Will I be paid for goods and services provided moving forward?

At this point, the company will be closely monitoring all goods and services that it procures through the balance of the CCAA process. The company will continue to pay for goods or services provided by vendors post-filing.

As a Creditor, what will happen to my relationship with DAVIDsTEA going forward?

We value our partners. DAVIDsTEA may continue to purchase your goods and services until the end of the CCAA process.

You should receive a formal communication from DAVIDsTEA, as applicable, indicating when DAVIDs TEA intends to terminate its contract or supply relationship with you. Please refer to that communication for the specifics of how DAVIDs TEA intends to handle its relationship with you between now and the end of the CCAA process.

How does the restructuring impact customers and are you going out of business?

No, the company is not going out of business—this entire process is to make sure that they can continue for many years to come. The company will remain fully operational during this restructuring process and are ready to serve you 24/7 at davidstea.com and in supermarkets and pharmacies across Canada. 

DAVIDsTEA company policies, including gift cards, returns and exchanges, and loyalty program, among others, will also continue as usual.

Which stores are closing?

As part of the restructuring process, the company announced it would be closing a total of 166 Canadian Stores and exiting all 42 U.S. locations. For more information on the 18 stores that will remain open, please view the list here. We are preparing for their reopen in the next few weeks and will be sure to let you know as soon as we have more information.

Will products change as a result of the filing?

Absolutely not! DAVIDsTEA remains committed to providing their community with the best variety of loose-leaf tea and accessories.

Will gift cards still be honoured?

Of course! You can continue to shop tea and accessories 24/7 at davidstea.com using your gift card. All you have to do is enter the number on the back of the card at checkout.

Will I receive items that I have ordered?

Totally! There’s no change to DAVIDsTEA’s online process, meaning if you’ve placed an order you should have already received an email letting you track its journey to your door. Due to COVID-19 safety practices, there may be slight delays in getting your order to you but the team is working hard to ensure that your package is delivered ASAP.

What will happen to my Frequent Steeper points and rewards?

You can continue to earn points and redeem your loose-leaf tea rewards on davidstea.com. All in-store rewards such a cups of tea-to-go will be honoured upon store reopening.

Where can I find additional information about the CCAA proceedings?

Additional information regarding the CCAA proceedings of DAVIDsTEA is available at the Monitor’s website: www.pwc.com/ca/davidstea.

If you have any additional questions, please contact:

PricewaterhouseCoopers Inc.

Investor Contact
MaisonBrison Communications
Pierre Boucher

Media Contact
Lyla Radmanovich