The Body Shop Canada parent took revenue, left company $3.3M in debt: court docs

TORONTO –

The head of The Body Shop Canada Ltd. says it’s seeking creditor protection because its parent company stripped its Canadian arm of cash and pushed it into debt.

Jordan Searle says in an affidavit that the company’s situation “deteriorated sharply” in December, after parent The Body Shop International Ltd. was purchased by private equity firm Aurelius.

The Body Shop Canada general manager found The Body Shop International kept taking its money but wasn’t paying vendors because the parent company said it had lost access to its financing and was slowing payments to creditors to conserve cash.

Searle says The Body Shop Canada was accustomed to its parent taking money from its account because the companies used a cash pooling arrangement, where the parent swept its subsidiary’s revenue and paid its expenses.

When The Body Shop International sought a form of creditor protection called administration last month in the U.K., Searle says The Body Shop Canada had $3.3 million in debt and no prospect of help from its owners.

Lawyers for The Body Shop International and Aurelius did not respond to requests for comment about Searle’s affidavit, which was filed days after The Body Shop Canada announced plans to close 33 of its 105 stores.