A group of lenders to Canadian luxury fashion retailer Ssense are trying to block a deal that would allow its founders to buy the company out of bankruptcy, arguing that liquidation would let them recover more cash.

In court filings this week, the group, led by Bank of Montreal, said it seeks to stop a founder-led buyout of the company’s parent, Atallah Group, and instead wants a judge to authorize an orderly liquidation of the retailer’s assets. 

The lender group, which also includes Royal Bank of Canada, JPMorgan Chase & Co., National Bank of Canada and Bank of Nova Scotia, is owed about C$113 million ($81 million) and would recover tens of millions of dollars more if the company’s assets were liquidated, it said in court documents. Details of the founders’ offer for the Montreal-based company aren’t public. 

“It is not appropriate, fair and reasonable to force the fulcrum creditors in the proceedings to accept a loss of this magnitude when there is an alternative providing a real and concrete path to a considerably higher economic outcome,” the lenders said in a filing. 

Representatives for the company and the lenders didn’t immediately respond to requests for comment.

The Government of Quebec’s financial arm, Investissement Quebec, also contested the bid in a separate notice on Wednesday, saying that “the purchase price is significantly insufficient.” IQ said Ssense owes it more than C$21 million.

The dispute centers on a bid submitted by an entity controlled by Ssense’s founders, which was approved by the court-appointed monitor, EY, after a monthslong sale process under the Companies’ Creditors Arrangement Act. The transaction would allow insiders to retain control of the business rather than sell it to an outside buyer.

Court records show the sale process was extensive. Advisers contacted 170 potential bidders, including financial and strategic buyers as well as liquidation specialists. Fifty-one parties signed non-disclosure agreements and received access to a data room, generating multiple non-binding offers. 

Two successive rounds of binding bids ultimately failed to meet court-approved conditions, prompting the monitor to relaunch the process in December with tighter rules and accelerated timelines.

That final round produced two binding bids, but only the founders’ offer complied with the court approved process, documents show. No liquidation bids were submitted, and EY concluded that the founders’ proposal was preferable to liquidation. 

In filings, the monitor said the deal would preserve more than 760 jobs, mostly in Quebec, keep Ssense operating as a going concern, and ensure customer returns are honored — an estimated C$19.5 million liability. Dozens of supplier contracts would also be assumed, and EY said creditor recoveries would likely be no worse than liquidation, with far less execution risk.