A syndicate of lenders led by the Bank of Montreal is taking legal action to stop the founders of Montreal-based luxury fashion retailer Ssense from buying back the company out of bankruptcy protection. The group has petitioned Quebec's Superior Court to dismiss the founders' proposal, arguing that a liquidation sale would provide a far better financial outcome for creditors owed millions.
Courtroom Battle Over Company's Future
The legal contestation was filed on January 15, 2024, just days after Ssense's co-founders—brothers Rami, Bassel, and Firas Atallah—announced they had won a bid to retain control of the company. The brothers had filed for bankruptcy protection in the summer of 2023, which allowed the business to continue operating while they developed a court-supervised plan to repay debts.
In documents filed by their lawyers at Borden Ladner Gervais LLP, the BMO-led group forcefully objected to the proposed sale to the founders. The lenders stated that the secured creditors should not be forced to accept a transaction that discharges their security for consideration "substantially below the value of the assets being sold."
The legal filing emphasized that a credible liquidation alternative exists, which they claim "offers a significantly better economic outcome" and guarantees "a materially higher recovery" for the lenders. The lawyers argued the approved sale to the founders is "not appropriate, fair, or reasonable" and that lenders should not be compelled to accept a major financial loss.
Millions in Debt and a Fallen Giant
The scale of the debt is substantial. According to the court documents, Ssense owes the lender syndicate more than $113 million as of last week. This financial struggle marks a dramatic turn for the online retailer, which was once a powerhouse in the fashion industry and reached a valuation of approximately $5 billion in 2021.
The company's difficulties began with the decline of the e-commerce boom that peaked during the COVID-19 pandemic. Like many digital-native retailers, Ssense faced challenges as shopping habits normalized and economic conditions shifted.
What Happens Next?
The lender group's notice calls on the court to outright dismiss the debtors' application to regain ownership. Instead, they are seeking judicial approval for a liquidation sale of the company's assets. This sets the stage for a significant courtroom showdown that will determine whether the Atallah brothers can salvage their company or if it will be broken up and sold off to pay creditors.
The outcome of this case will have major implications for the future of one of Montreal's most prominent tech-fashion success stories and for the recovery of millions in bank debt. The Gazette reached out to Ssense for comment on the lenders' legal move but did not receive a reply prior to publication.
The court is now tasked with weighing the founders' restructuring plan against the lenders' argument for liquidation, a decision that will chart the final course for the beleaguered luxury retailer.
