Pusateri’s Fine Foods fallout: grocer owes creditors $37 million

Italian boutique grocer Pusateri’s owes creditors more than $37 million, according to notices published by Albert Gelman Inc., the insolvency trustee assigned to the filings, on Aug. 20. 
Its Yorkville location owes at least $8 million; its Bayview Village location $10.1 million; and its prep kitchen, Pusateri’s Kitchen Ltd., $19.3 million. 
Scotiabank is the largest secured creditor listed on the notice obtained by the Star, with $4.9 million owed for computers, furniture, inventory, leaseholds, and other prepaid and sundry assets, the notice states.
The five unsecured creditors listed which are owed the most across all locations are Happy Pops Inc., owed more than $117,000; Rahier Patisserie, $74,700; KeHe Distributors, $47,600; Martelli Foods Inc., $41,700, and Lesley’s Party Sandwiches is owed around $31,600.
Since publication of this article, some suppliers have come forward to contest the figures.
“To clarify, the amount owed to Martelli Foods is $1,306.40,” wrote Rosa Martelli, employee in the accounts receivable department of Martelli Foods, in an email. The figure published by the insolvency trustee is not correct, she added.
Leila Keshavjee, owner of Happy Pops, does not believe her figure is correct either. She said the company is owed just $1,065.43.
Gelman did not respond to requests for comment about the accuracy of the figures.
Pusateri’s head of marketing, Paolo Pusateri, said the company ‘will investigate’ the insolvency numbers. 
The Yorkville and Bayview Village stores, and Pusateri’s Kitchen were each separate corporate entities. The first meeting of the creditors will take place on Aug. 30, the notice states.
Prior to Friday’s announcement that Pusateri’s would be shuttering several of its stores and putting them into bankruptcy, suppliers told the Star that the grocer was struggling to pay invoices and has left many in the lurch.
The owner of a small business that sells prepackaged organic salads says he has a history of difficulty being paid by the grocer.
Another supplier, with invoices several months overdue, said Pusateri’s was slow to respond to her emails. When the grocer did respond, she was told that the invoices had been entered into their system incorrectly. She refused to deliver more product until they paid her. When Pusateri’s finally paid, she ended the business relationship.
One supplier who has been working with the grocer for several years said that Pusateri’s wasn’t always this way; they used to pay promptly, but things have slowed since the pandemic.
Another supplier said he is still owed nearly $2,000 by the grocer and that the payment is more than six months late.
The Star granted suppliers anonymity because they have an ongoing relationship with Pusateri’s and were concerned about future supply contracts.
In an emailed response on Monday to questions surrounding the bankruptcy and the salad company’s invoicing, Paolo Pusateri said the company “has been facing significant financial pressures which have been impacting our operations, not limited to timely and regular flow of merchandise.”
On Friday, co-owner Ida Pusateri sent out a memo announcing that the chain of upscale food stores will consolidate operations into one location, on Avenue Road, while other outlets permanently close and commence bankruptcy proceedings.
According to insolvency trustee Albert Gelman Inc., the locations to be closed include Pusateri’s Bayview Village, Pusateri’s Yorkville and Pusateri’s Kitchen, which supplied the various Pusateri’s locations with in-house branded products.
Pusateri’s Yorkville might owe even more than the $8 million mentioned in the notice.
The location is also being sued for alleged damages amounting to $364,000 by property manager Minto Apartment Limited Partnership, the owner of 57 Yorkville Ave. In court documents filed in July, Minto alleges that Pusateri’s failed to pay rent adjustments set in 2023 and 2024 for the prior years.
Pusateri’s eventually left 57 Yorkville in April, but the property manager alleges it incurred extra restoration costs of more than $40,000 to lease it to the next tenant. When Pusateri’s issued a cheque for the April rent, it bounced “due to non-sufficient funds,” according to Minto’s statement of claim. Pusateri’s Yorkville has filed a notice of intent to defend the action.
Toronto neighbourhoods will feel Pusateri’s absence.
The chain is credited with introducing a new kind of upscale market to the city after its humble beginnings as a small produce market on St. Clair Avenue in Toronto’s Corso Italia neighbourhood.
When Cosimo Pusateri and his wife Ida took over the business, they transformed the market into a “fine-food emporium,” specializing in imported goods such as prosciutto, breads, cookies, balsamic vinegars and olive oils.
When Cosimo died in 1995, Ida continued to run the business with her brother Frank Luchetta, who is currently president and chief executive.
In February, Pusateri’s closed its Yorkville location after more than 20 years in business.
Then, on Friday, Ida Pusateri shared news of consolidation and store closures in a memo to suppliers.
“We are writing to inform you of an important and difficult decision,” the memo read. “After careful consideration of ongoing financial pressures, we announce that Pusateri’s will consolidate operations into one location, Avenue Road.
“Pusateri’s Eaton Centre will remain open in a limited capacity as a food service-only operation.”
The announcement came shortly after the company permanently closed its Bayview Village location last week in response to “ongoing financial pressures impacting business operations, lingering effects of COVID, and higher operational costs,” wrote Paolo Pusateri, in an emailed statement Friday.
“We want to deeply reiterate our commitment to our supplier relationships as we forge ahead with our restructured business model,” the memo read. “We value your support as we fully rightsize the business and return it to a sustainable and profitable future.”
It’s possible that at least some of the suppliers owed money will never be paid, said Jeffrey Levine, partner at McMillan LLP, a business law firm, where he specializes in insolvency and restructuring disputes. It will depend largely on how Pusateri’s debt was structured, he added.
The rights of secured creditors generally take precedence over smaller unsecured creditors, like suppliers, says Levine. Pusateri employees and landlords would also get their cut before suppliers.
With files from Ana Pereira
EDITOR’S NOTE — Aug. 22, 2024
This story has been updated to include two Pusateri suppliers who dispute the amount they are owed as listed in the insolvency documents.