Giftcraft: the seller's note and the buyer's receivables

Ripskirt Hawaii, LLC sold a wrap skirt in four lengths, cut from quick-dry, wrinkle-resistant fabric, online in the United States, Canada, Australia and New Zealand, and in 2024 it earned $28.2 million in revenue and $4.9 million in EBITDA, according to the receiver. The Giftcraft group bought it on September 16, 2022 (First Report, July 8, 2025, paras. 18–21). Part of the price was an indemnity holdback of US$3.5 million owed to the seller, Elsasser Holding Company, Inc., which says Giftcraft Holdings USA Inc. did not pay it when due and gave it instead an unsecured promissory note dated September 24, 2024 (Hollard Affidavit, Sept. 11, 2026, paras. 11–12). The note recites that it was issued "in full and complete satisfaction" of the holdback obligation, and the same day Elsasser Holding signed a subordination and postponement agreement with Royal Bank of Canada, the group's lender (Third Report, Aug. 14, 2026, App. "D", s. 8; App. "E").

KPMG Inc., as receiver, sold Ripskirt's business to Sierra Brands Group LLC on May 4, 2026, for proceeds of US$2,397,170 before taxes, fees, transaction costs and potential prior-ranking claims (Fourth Report, Aug. 14, 2026, paras. 15, 18). Elsasser Holding says its agreement with RBC entitles it to a share. RBC says it does not, and on September 11 filed a responding record built on an affidavit of Nick Hollard, an associate at its counsel, Borden Ladner Gervais LLP. The same day the receiver answered a second claimant, the buyer of the Giftcraft gift business, which wants $961,952.84 over receivables it says were set off or collected before it took them (Supplemental Fifth Report, Sept. 11, 2026, paras. 1, 39).

What is left to divide

Giftcraft, founded in 1946 and run from 8550 Airport Road in Brampton, once employed more than 200 people selling giftware and décor to more than 25,000 retailers; it had 2024 revenues of $58 million (First Report, July 8, 2025, paras. 12–15). RBC's affiant on the application, Andrew O'Coin, deposed that management told the bank on April 22, 2025 that Ripskirt, "the Debtors' primary cash-flow and profit-generating business segment, had experienced an unprecedented decline in sales in April" after the United States announced global tariffs (O'Coin Affidavit, May 8, 2025, RBC Responding Record, Ex. "A", para. 45). Justice Osborne appointed KPMG on May 14, 2025 (Endorsement of Justice Cavanagh, Jan. 22, 2026, para. 5).

Fifteen months on, the receiver reports that it "has realized on substantially all of the Debtors' assets and does not anticipate any further material realizations" (Fourth Report, Aug. 14, 2026, para. 22). The Giftcraft business went to Giftcraft 2025 Inc., an affiliate of CTG Brands Inc., in a sale that closed on September 2, 2025 for gross proceeds of approximately $10.4 million (Fifth Report, Aug. 14, 2026, para. 6). After assigning four of the debtors into bankruptcy on May 27, 2026, the receiver paid RBC an interim distribution of $8.4 million, which it says leaves approximately $41.3 million of secured debt, exclusive of fees, costs and interest; the receiver's independent counsel, Harrison Pensa LLP in Canada and Chipman Brown Cicero & Cole, LLP in the United States, have opined that RBC's security is valid and enforceable (Fourth Report, Aug. 14, 2026, paras. 23–29).

Of $6,913,551 on hand at July 31, 2026, the receiver's motion for November 16 would pay RBC a further $4.0 million and keep about $2.9 million, including reserves of $807,764 for FedEx Supply Chain, $424,404 for Elsasser Holding and $960,000 for CTG (Fourth Report, Aug. 14, 2026, paras. 11, 43–45). FedEx asserts a possessory warehouse lien for about US$580,000 of pre-appointment services at the Indiana warehouse that held Ripskirt's inventory, ranking ahead of RBC; RBC disputes it, and the receiver has not sought an opinion on the lien. At a case conference on July 30, 2026, Justice Black set that dispute down for November 9 (Notice of Motion, Aug. 14, 2026, paras. 10–13).

A note in place of a holdback

The note makes its whole balance payable on a "Change of Control," defined to include "the sale or other disposition of all or substantially all of the assets of RipSkirt Hawaii, LLC," and lists the appointment of a receiver among its events of default (Third Report, Aug. 14, 2026, App. "D", ss. 1(b), 3(b)). The subordination agreement, governed by Ontario law, postpones the note "in all respects and for all purposes" to RBC's debt and bars any payment to Elsasser Holding until the earlier of a sale of a borrower's or guarantor's assets or equity, "provided that the Lender has provided its prior consent to such sale"; a change in control, again with the lender's prior consent; or payment of RBC in full (Third Report, Aug. 14, 2026, App. "E", pp. 78–79). On a sale, RBC's capital loans are repaid first, Elsasser Holding second and RBC's operating loan third. On a change of control, the proceeds go "firstly, on a pro-rata basis" to the capital loans and to Elsasser Holding, then to the operating loan, and a sale that is also a change in control "shall be treated as a Change in Control for the purpose of this Agreement" (Third Report, Aug. 14, 2026, App. "E", pp. 79–80).

The receiver measures the sharing by RBC's capital loans, approximately US$30 million, against Elsasser Holding's approximately US$3.5 million (Third Report, Aug. 14, 2026, para. 22). On US$2.4 million of proceeds that puts the maximum claim at approximately US$0.3 million, about 12%, and since the receiver assumes any claim would run on net proceeds, it "likely will be less than US$0.3 million" (Fourth Report, Aug. 14, 2026, para. 36, n. 2).

Elsasser Holding's case is in a letter that Alecia Elsasser, Ripskirt's founder and one of the company's two directors, emailed to the court for Justice Cavanagh on May 9, 2026, five days after the sale closed. The agreements, she wrote, "expressly preserved certain payment and participation rights in connection with a sale or change of control transaction involving RipSkirt," and they "do not expressly limit such proceeds to 'net proceeds,'" or to proceeds after fees and expenses. The letter gives the company's account of why the note is unpaid: "From Elsasser Holding's perspective, RBC's lending and enforcement actions ultimately resulted in RipSkirt being sold before the underlying purchase obligations to the former owners of RipSkirt were fully satisfied" (RBC Responding Record, Sept. 11, 2026, Ex. "D", pp. 102–104).

The receiver asks the court for advice and directions, and its Third Report summarizes RBC's position that no waterfall was ever triggered, because the provisions "contemplate a voluntary transaction undertaken by the Debtors, whereas the Ripskirt Transaction was an involuntary, court-supervised realization conducted by the Receiver" (Third Report, Aug. 14, 2026, paras. 24, 27). In RBC's view the receivership itself was the trigger: the appointment was an event of default under the note, making Elsasser Holding's debt due on May 14, 2025 while fully subordinated, and the later sale "did not alter or reverse the priority scheme established under the Subordination Agreement" (Third Report, Aug. 14, 2026, paras. 25–26). Mr. Hollard's affidavit adds that Elsasser Holding, a closely held Oregon corporation owned and directed by Cole and Alecia Elsasser, did not seek or obtain security for the holdback or the note, and that RBC "expects to suffer a significant shortfall" (Hollard Affidavit, Sept. 11, 2026, paras. 5, 10, 13).

RBC's record also takes up how Elsasser Holding will be heard. On August 14, Cole Elsasser, its president, wrote to Justice Cavanagh for leave under Rule 15.01(2) to represent the corporation, explaining that the company had interviewed several lawyers and concluded that "retaining counsel would likely exceed any recovery it could reasonably expect to achieve" (RBC Responding Record, Sept. 11, 2026, Ex. "E", p. 106). BLG answered on August 19 that RBC does not oppose leave, but objected under Rule 1.09 to a second direct letter to a judge, noted that Justice Cavanagh is not seized, and set out its understanding that in the 2022 sale, financed by HSBC Bank Canada (now RBC), "Elsasser netted approximately USD$29.8 million of cash at closing of the transaction," asking to be told if it was mistaken (RBC Responding Record, Sept. 11, 2026, Ex. "F", pp. 109–110). Mr. Hollard notes that Mr. Elsasser told Justice Black on July 30 that the company would retain Canadian counsel and did not seek RBC's consent to appear on his own affidavit, and deposes that he is "not aware of any reason why Ms. Elsasser could not have sworn the Elsasser Affidavit" (Hollard Affidavit, Sept. 11, 2026, paras. 4, 21). That affidavit, dated August 28, is not among the filings read for this piece. The claim is set down for November 9, 2026 at 11:30 a.m., after the FedEx lien (Notice of Motion, Aug. 14, 2026, para. 18).

What the receivables were worth

Under the asset purchase agreement of July 7, 2025, CTG's affiliate paid a fixed $2.666 million plus the value of receivables, inventory and certain deposits, with no due diligence condition, on an "as is, where is" basis with "no recourse to the Vendor." Key account receivables were priced at 85% of face and the rest at 37.5%, discounts the receiver says "were arrived at by CTG entirely based on its own due diligence" (Fifth Report, Aug. 14, 2026, paras. 26, 28–30). The post-closing adjustment was settled on October 16, 2025 at $704,253.20, between the purchaser's figure of $1,156,431.48 and the receiver's $660,283.86, and paid (Fifth Report, Aug. 14, 2026, paras. 40–42).

On January 16, 2026, CTG's counsel, Pallett Valo LLP, demanded $961,952.84. Its letter says customers, Canadian Tire among them, applied discounts and set-offs arising from Giftcraft's pre-closing dealings against receivables CTG had bought, and that the price formula "was designed to account for ordinary collection risk, not for the existence of material pre-closing set-off rights." It says further receivables of $72,098.83 and US$350,340.41 had been collected before closing but carried as outstanding, and that "Amounts already collected are not accounts receivable; they are cash or cash equivalents" (Fifth Report, Aug. 14, 2026, App. "N", pp. 183–185). CTG blamed its late discovery on access to Giftcraft's ERP system about a week after closing and to email two to three weeks after: "This is not a case of buyer's remorse or ordinary commercial risk" (Fifth Report, Aug. 14, 2026, App. "N", pp. 185–188).

The receiver's answer has not changed since February: "any subsequent collection experience or valuation variance is a post-closing commercial risk borne by the Giftcraft Purchaser." Its Fifth Report adds that in late June 2025 it sought estimates from two advisory firms for a review of the receivables and proposed the option to CTG, but "CTG never instructed that this review proceed" (Fifth Report, Aug. 14, 2026, paras. 24, 53). It also records that on July 31, 2026 the Giftcraft purchaser took an assignment of Giftcraft Canada's 2016 purchase agreement with Canadian Tire and agreed to pay the balance Giftcraft Canada owed Canadian Tire, which CTG put at approximately US$244,000, a figure the report calls consistent with the January 16 letter (Fifth Report, Aug. 14, 2026, paras. 50–51).

CTG and Giftcraft 2025 Inc. brought a cross-motion, returnable November 16, on an affidavit of Bin Wang, CTG's executive vice-president, sworn August 28, 2026; neither is among the filings read for this piece. As the receiver's September 11 supplemental report describes it, Mr. Wang says the receiver made representations about the receivables and that payments were "received by the Receiver" but left on the books as outstanding, and he puts the "Receivables Damages" at CA$560,567.26 (Supplemental Fifth Report, Sept. 11, 2026, paras. 1, 24, 32–33, 41).

"In the Receiver's view, CTG did not properly conduct extensive due diligence on the Subject Companies' accounts receivable," the supplemental report begins. By its account, CTG counted about 1,800,000 units of inventory over roughly three weeks, listed about 45 transition tasks on July 11, 2025 with none on receivables, and had the Canadian Tire contract, whose set-off right "will survive any assignment of this Agreement or Vendor's accounts receivable," about two weeks before signing, without asking about accrued set-offs (Supplemental Fifth Report, Sept. 11, 2026, paras. 4–6, 9–11, 36). After closing, having been given admin-level access to Giftcraft's Netsuite account for the data migration, "CTG locked the Receiver's personnel out," until September 15, 2025. Many of the payments Mr. Wang lists predate the appointment, the receiver says, and it can no longer verify the rest without the customer portals, Netsuite or the staff (Supplemental Fifth Report, Sept. 11, 2026, paras. 17–18, 33, 37).

Should the court side with CTG, the receiver asks to verify the amounts first and says any award must reflect the discount CTG paid, which on its arithmetic brings the claimed damages to $466,514.15. It recommends that the court "deny the cross-motion of CTG and the Giftcraft Purchaser, authorize it to distribute the CTG Disputed Proceeds to RBC, and grant costs against CTG and the Giftcraft Purchaser in favour of the Receiver" (Supplemental Fifth Report, Sept. 11, 2026, paras. 38–42). Both motions, and the second distribution to RBC, are returnable on November 16, 2026 (Fourth Report, Aug. 14, 2026, para. 11).