A baby car seat made by Safety 1st, a brand owned by Dorel Industries, in Brossard, Que. The company has been in financial straits for months.Christopher Katsarov/The Canadian Press
Dorel Industries Inc. DII-B-T says it’s close to clinching a pool of fresh financing as the Canadian consumer products maker tries to reset its business under pressure from U.S. tariffs.
The maker of Maxi-Cosi baby strollers and DHP daybeds, which has been in financial straits for months, said Monday that it is working to finalize agreements that would recapitalize its balance sheet with up to US$385-million in new credit facilities and a sale of preferred shares. It expects to cement the deals by the end of September.
A group of lenders led by affiliates of TCW Asset Management Company as administrative agent will provide up to US$310-million while Alberta Investment Management Corp. will take a private placement of preferred shares for US$75-million, Dorel said in a news release.
The backers will be entitled to board representation as part of the agreements, the company said. They’ll also receive warrants to purchase Dorel’s Class B subordinate voting shares at a strike price of $0.01 for seven years. The stock is now trading at about $1.56 per share.
Dorel, which is based in Montreal, said it intends to use the proceeds to pay off in full its current senior secured debt, worth US$180-million. The remainder will go to restructuring its home furniture business and bolstering its working capital.
Dorel went public in 1987 after a merger between children’s gear manufacturer Dorel Co. and furniture maker Ridgewood Industries Ltd. Its shares once traded above $80 but they’ve fallen dramatically in recent years after a takeover attempt by private equity giant Cerberus Capital Management fell apart in 2021.
While the manufacturer’s juvenile business is holding its own, its home furniture business has been crushed by U.S. import tariffs (much of its furniture is made in China and imported) and the resulting pullback in discretionary spending among consumers. In July, the company announced it would stop all Dorel Home manufacturing operations in North America as it reshapes itself into a smaller organization with fewer products.
“We’re trying to cut all of the parts of the business that didn’t make money leaving only the parts that were profitable, which is really the Cosco Plus business and our European business,” Dorel chief financial officer Jeffrey Schwartz told analysts on its earnings call in August. “Everything else is going to be cut.”
Canadian securities regulations require that Dorel receive approval from its shareholders to issue the warrants. To that end, the company said it has submitted to regulators written consents from investors holding more than 50 per cent of its voting shares and applied to the Toronto Stock Exchange to accept those consents in lieu of a shareholders meeting.