Canadian sports drink company BioSteel filing for creditor protection, seeking new buyer

The owner of sports drink company BioSteel says it has filed for creditor protection in the U.S. and Canada and is trying to find a buyer for the business.

Ontario-based Canopy Growth, the largest cannabis company in North America, said in a news statement Thursday that it has ceased funding BioSteel Sports Nutrition Inc., and that BioSteel has commenced proceedings under the Companies Creditors Arrangement Act (CCAA).

Companies undergo CCAA when they seek a court’s help to protect them from their creditors to ensure orderly proceedings while they either restructure or wind down operations. Alongside the Canadian CCAA proceedings, the company will also undergo creditor protection under Chapter 15 of the U.S. bankruptcy code.

BioSteel was founded in Toronto in 2009 by entrepreneur John Celenza and then-NHLer Mike Cammalleri. It grew quickly in large part thanks to marketing deals with several dozen NHL, NBA and NFL teams, as well as notable athletes including Connor McDavid, Nathan MacKinnon, John Tavares and recent No. 1 overall pick Connor Bedard — all of whom attended a recent training camp together.

The company was eventually taken over by Canopy Growth in 2019, in the hopes that the cannabis company could diversify its products into beverages. That hasn’t quite panned out as planned. 

The CCAA filing was undertaken because the company “no longer has access to funding for the brand, which continued to generate negative operating cash flow,” BioSteel said. 

“BioSteel made the decision to conserve cash and put the business into hibernation to preserve its assets. BioSteel sought creditor protection under the CCAA to conduct a court-supervised sale process for its business and property for the benefit of its stakeholders.”

Since the takeover, Canopy has spent about $366 million on BioSteel and the company currently burns through about $15 million in cash every month, court filings show.

Canopy says BioSteel was responsible for about 60 per cent of its financial losses this fiscal year. As of August, the company had 190 employees in the U.S. and Canada.

Sales are at least growing, as BioSteel booked $24 million worth of sales revenue in the first three months of 2023 — more than twice as much as the same period the year before.

But its cost for those sales eclipsed $90 million, and other expenses topped $114 million, including about $12 million in advertising and promotional costs related to the NHL sponsorship.

The most recent payment on that NHL deal — due on Sept. 1 — was not made, according to a court filing. Between October and March of next year, the company owes another $12 million for its various sponsorship agreements.

Following the insolvency proceedings, the company “does not intend to make any of these upcoming payments,” filings show.

While companies often do shut down completely as a result of CCAA proceedings, that’s not always the case. For BioSteel, the plan is to find a buyer who wants to run it as an independent company.

As of July, BioSteel has engaged with 24 different potential buyers, and by Sept. 5, six preliminary, non-binding proposals were received.

The CCAA filing is designed to buy time to sort out any details that would be required for those deals to come to fruition.