Colabor's Debt Crisis: A Distributor on the Brink of Collapse

SAINT-BRUNO-DE-MONTARVILLE, Quebec – December 15, 2025 – Colabor Group Inc. (TSX: GCL), a cornerstone of the food distribution network in Quebec and the Atlantic provinces, confirmed today it has failed to meet critical financing conditions set by its lenders, pushing the company to the edge of insolvency and raising the spectre of creditor protection.

In a corporate update that sent a chill through the regional food service industry, the company announced it was unable to provide satisfactory non-binding letters of intent for a comprehensive refinancing of its credit facilities and a crucial $15 million equity raise. This requirement was a key condition of a forbearance agreement with its main senior lenders—a consortium including The Toronto-Dominion Bank, Bank of Montreal, and The Bank of Nova Scotia—and the provincial government's investment arm, Investissement Québec. The failure to meet this December 15 deadline signals that the company's efforts to find a private market solution to its severe liquidity problems have fallen short, drastically narrowing its path forward.

Anatomy of a Financial Downfall

A deep dive into Colabor's recent financial disclosures reveals a company buckling under the weight of its own debt. As of its third-quarter report, net debt had soared to $112.1 million, a dramatic increase from $47.8 million at the end of the previous fiscal year. This pushed its leverage ratio to a precarious 7.8 times its adjusted EBITDA, a level that is unsustainable for most businesses.

The financial strain was starkly illustrated by a staggering $74.4 million net loss from continuing operations in the third quarter of 2025. This loss was almost entirely driven by a $75 million non-cash goodwill impairment charge, an accounting measure that serves as a powerful admission that the company’s assets, including its brand and customer relations, are no longer worth what they were once believed to be.

The crisis appears to have been accelerated by the ambitious acquisition of Alimplus Inc.'s food distribution assets in June 2025. While the deal was intended to solidify Colabor's market leadership and generate synergies, it was financed with more debt. The acquisition, which cost nearly $50 million, increased the company's senior secured credit facility and added a new layer of subordinated debt from Investissement Québec. While sales did increase post-acquisition, profitability and cash flow deteriorated, suggesting that integrating the new assets while managing existing financial pressures proved to be an overwhelming challenge.

To compound its problems, the company also suffered an approximately $8 million revenue loss from a cybersecurity incident in July, further straining its already tight cash flow.

A Supply Chain on High Alert

The potential collapse of Colabor is not an isolated corporate event; it threatens to send shockwaves through the regional economy. Described as the largest food service operator in Quebec, the company is a critical link for thousands of hotels, restaurants, institutional clients (HRI), and independent retail outlets. A significant operational disruption could mean immediate sourcing challenges, higher costs, and logistical chaos for businesses that rely on Colabor for everything from specialty seafood to broadline food products.

Suppliers, particularly smaller food producers and manufacturers, now face the unnerving prospect of substantial financial losses. Should Colabor seek creditor protection, these suppliers would likely be classified as unsecured creditors for any pre-filing debts. In such scenarios, the probability of recovering the full amount owed is typically very low. The human cost is also significant, with the livelihoods of Colabor's 670 employees hanging in the balance as the company's future becomes increasingly uncertain.

Navigating the Path to Protection

With its strategic alternatives dwindling, Colabor has openly stated it is considering "seeking protection under applicable creditor protection laws," a clear reference to Canada's Companies' Creditors Arrangement Act (CCAA). The CCAA is not a bankruptcy filing but a court-supervised restructuring process designed to give a financially distressed company breathing room to reorganize its affairs and develop a viable plan to continue operating.

If Colabor proceeds with a CCAA filing, the court would grant an initial "stay of proceedings," which immediately halts all creditor actions and lawsuits. This would give the company a crucial, albeit temporary, reprieve to stabilize its operations and negotiate a plan of arrangement with its stakeholders. A key first step would be to secure debtor-in-possession (DIP) financing—new funding that receives priority over existing debt—to pay for ongoing expenses like payroll and supplier deliveries during the restructuring.

For the many businesses that supply Colabor, a CCAA filing creates a clear divide. They would almost certainly be paid for any goods and services delivered after the filing date to ensure business continuity. However, their claims for payment on goods delivered before the filing would be frozen and subject to the outcome of the restructuring plan, where they would join the ranks of other unsecured creditors.

Investor Whiplash and a Market in Retreat

Investors have been fleeing Colabor's stock for months as the financial distress became more apparent. The company's share price has collapsed by over 80% in the past year, including a staggering 59% single-day drop in October following the release of its grim third-quarter results. Today's announcement has pushed the stock to new lows, trading for mere pennies as the market prices in a high probability of a restructuring that could wipe out existing equity.

The company's own press release included a stark warning that "the value of their investment could decrease materially," a candid admission of the severe risk faced by its shareholders. Analyst price targets, which once suggested significant potential upside, now appear hopelessly optimistic in the face of a potential CCAA filing. The market has passed its verdict: without a last-minute miracle from its lenders, Colabor's current corporate and capital structure is untenable.

The company is now in a race against time. It continues to negotiate with its senior lenders and Investissement Québec for further forbearance and the additional short-term liquidity needed to keep operations running. However, the lenders' patience has been tested, and their willingness to extend further credit without a viable long-term plan is far from certain. The fate of this major food distributor now rests on tense, closed-door negotiations that will determine whether it can engineer a recovery or succumbs to its crushing debt load before its January 30, 2026, forbearance agreement deadline arrives.