Eddie Bauer Canada: a bankruptcy instead of a ruling on WEPP

Eddie Bauer was founded in Seattle in 1920 as a sporting goods and outdoor equipment store. By February 2026 its Canadian operating company, Eddie Bauer of Canada Corporation, ran 24 leased stores across six provinces, 11 of them in Ontario, and employed about 379 people, 182 of them in Ontario. Canadian sales in 2025 came to approximately US$62.4 million, some 11% of the group's net revenue and 20.5% of its retail sales, per the Pre-Filing Report of the Proposed Information Officer, Feb. 16, 2026, paras. 3.1.3, 3.1.5–3.1.6, 3.2.1 and the Endorsement of Justice Cavanagh, Feb. 9, 2026, para. 7. An Eddie Bauer business had been through the CCAA in Canada once already: the proposed information officer disclosed in a footnote that some of its people had worked on the proceedings of Eddie Bauer of Canada, Inc. and Eddie Bauer Customer Services Inc., in which RSM Richter Inc. was appointed monitor by an initial order dated June 17, 2009, per the Pre-Filing Report of the Proposed Information Officer, Feb. 16, 2026, s. 2.0, n. 1.

This time no actionable bid came in. Every Canadian store had closed by April 30, 2026. The employees were let go and, to the information officer's knowledge, "paid their full wages and vacation pay, but not paid any severance or termination pay," per the Third Report of the Information Officer, June 8, 2026, paras. 3.1.5, 4.3.1. The last contested question put to the Toronto court was whether those employees could reach the Wage Earner Protection Program through a recognition proceeding under Part IV of the CCAA. Canada said they could not, and the request was withdrawn before the court ruled on it: on July 22 the Canadian company assigned itself into bankruptcy, and on August 7 the recognition proceeding ended by certificate.

A wind-down agreed before the filing

The causes, in the company's account as the information officer relayed it, began in 2023: shifts in consumer preferences, rising inflation and "unfavorable tariff policies and exemptions," which produced negative earnings of approximately US$2 million in 2022, US$10 million in 2023, US$82 million in 2024 and US$80 million in 2025, per the Third Report of the Information Officer, June 8, 2026, para. 2.1.1. The brand itself had belonged since 2021 to an affiliate of Authentic Brands Group, which licensed it back to the operating company. Talks late in 2025 ended with the licence's wholesale and e-commerce rights terminated, effective January 31, 2026, and moved to Outdoor 5, LLC, leaving the company its stores. SOLIC Capital Advisors, retained on November 24, 2025 to market the stores, had two indications of interest by January 30, and closing sales run by Hilco Merchant Resources and SB360 Capital Partners began between January 26 and February 7, per the Pre-Filing Report of the Proposed Information Officer, Feb. 16, 2026, paras. 3.1.3, 4.1.1, 4.2.1.

The Canadian companies' only liability to the group's lenders was a limited guarantee of the obligations under a US$1.75 billion revolving facility agented by Wells Fargo, on which about US$728 million was outstanding. They gave it on February 8, 2026, as part of the lenders' forbearance, capped at US$6.384 million and secured on substantially all their assets; the proposed information officer understood the cap to reflect the value the U.S. business had contributed to the Canadian one, with the lenders bound to look to U.S. collateral first, per the Pre-Filing Report of the Proposed Information Officer, Feb. 16, 2026, paras. 3.4.2(a), 3.4.3–3.4.5, 4.2.6–4.2.7. Its counsel later opined that the security was valid, enforceable and perfected, per the First Report of the Information Officer, Mar. 18, 2026, para. 2.1.5.

The chapter 11 petitions went in at the U.S. Bankruptcy Court for the District of New Jersey on February 9, 2026, and Justice Cavanagh granted an interim stay in Toronto the same day. On February 18 the court recognized the chapter 11 cases as a foreign main proceeding, finding the Canadian debtors' centre of main interests in the United States; the only corporate function Eddie Bauer Canada performed in Canada was payroll. It appointed KSV Restructuring Inc. as information officer and granted three charges: an administration charge of CAD$1 million, a directors' charge of CAD$1.927 million and an intercompany charge, per the Endorsement of Justice Cavanagh, Feb. 18, 2026, paras. 1–3, 12–15, 22–33. The directors' charge was built from three exposures: payroll of CAD$409,918, vacation pay of CAD$342,192 and sales tax of CAD$1,173,434, per the Pre-Filing Report of the Proposed Information Officer, Feb. 16, 2026, para. 6.2.3.

The stores, the leases and the plan

No qualified bid arrived by the March 3 deadline, the auction was cancelled, and no actionable proposal came in afterward, per the Second Report of the Information Officer, Apr. 28, 2026, paras. 3.1.3–3.1.5. By April 24 the Canadian closing sales had produced approximately USD $9.5 million in net sales; most Canadian leases were rejected effective March 31 and the rest effective April 30, per the Affidavit of George Pantelis, Apr. 24, 2026, para. 11. "No stakeholder, including any Canadian landlord, objected to the First Rejection Order," the information officer reported in the Second Report of the Information Officer, Apr. 28, 2026, para. 3.1.7.

The New Jersey court confirmed the plan on April 16. All ABL claims that voted accepted it, as did approximately 94.84% in number and 81.07% in amount of the general unsecured claims that voted. The one objection left at the hearing came from the U.S. Trustee, who argued that an opt-out release is per se nonconsensual; it was overruled. The plan sent the ABL agent a US$15,485,219 mandatory paydown and created a trust for general unsecured creditors funded with up to US$3 million in cash, the assigned avoidance actions and US$250,000 for its expenses; the SPARC intercompany claim and the lenders' deficiency claims were excluded from it, per the Second Report of the Information Officer, Apr. 28, 2026, paras. 3.3.2, 3.6.2–3.6.3, 4.1.2. The restructuring support agreement had already earmarked a portion of the proceeds for general unsecured creditors, "including unsecured creditors of the Canadian Debtors," per the Affidavit of George Pantelis, Apr. 24, 2026, para. 13. Justice J. Dietrich recognized the confirmation order on April 30, and the plan took effect on May 6, when Steven Balasiano of MHR Advisory Group, LLC became plan administrator and sole manager, director and officer of the debtors, per the Third Report of the Information Officer, June 8, 2026, paras. 1.0.9, 1.0.11, 3.2.3, 3.3.1.

The question Canada would not concede

The April 30 motion also asked for a declaration under s. 5(1)(b)(iv) of the Wage Earner Protection Program Act, which lets a worker be paid when the former employer "is the subject of proceedings under Division I of Part III of the Bankruptcy and Insolvency Act or under the Companies' Creditors Arrangement Act and a court determines under subsection (5) that the criteria prescribed by regulation are met." The regulation's criterion is that all the employer's employees in Canada have been terminated other than those kept to wind down, per the Endorsement of Justice Dietrich, Apr. 30, 2026, paras. 2(c)–(d), 10 and the Second Report of the Information Officer, Apr. 28, 2026, para. 6.0.2. The foreign representative argued that Eddie Bauer Canada was the subject of proceedings under the CCAA "by virtue of its participation in these recognition proceedings," in which the court had stayed proceedings against it, recognized the U.S. orders and compelled suppliers to keep supplying. It cited one order: SLP Holdings Ltd. (Re), in which Justice Fitzpatrick of the B.C. Supreme Court found on June 21, 2023 that the requirements were met in a Part IV recognition, per the Factum of the Applicant (Third Recognition Order), Apr. 28, 2026, p. 17 and n. 40. KSV supported the declaration, reasoning among other things that it "will obviate the need for, and avoid the associated costs of, commencing a receivership proceeding or assigning Eddie Bauer Canada into bankruptcy," adding that there was "no assurance" any stakeholder would pursue either path, per the Second Report of the Information Officer, Apr. 28, 2026, para. 6.0.3(d)–(e).