(Bloomberg) — Canadian real estate services firm Avison Young said it is moving closer to a restructuring to clean up its balance sheet after defaulting on a senior term loan that triggered a rating downgrade.
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S&P Global Ratings said in a statement Friday that Toronto-based Avison Canada failed to make principal and interest payments in the third and fourth quarters of 2023, placing the company in selective default. It was announced that the rating had been downgraded to SD, which corresponds to debt default. S&P's action was expected, company spokeswoman Andrea Zubiedris said in an email.
“We're just eliminating well over 50% of all our obligations,” Chief Executive Mark Rose said in an interview with Bloomberg on Saturday.Non-independent directors will also be removed from Avison's board. He added.
The company is also preparing to announce its restructuring on Monday, updating rating agencies on its plans. Rose said he said at that point S&P was obligated to immediately notify the market, but did not provide a complete picture of the company's position.
Representatives for S&P did not respond to requests for comment.
Rose said the default was “purely technical” and based on the non-payment agreement the company had with its lenders as part of an impending restructuring. All of the company's investors and creditors have agreed to a plan that includes new funding from existing backers, Rose said.
The company's approximately 700 partners will continue to own the majority of the company, but the Caisse de Depot et Placement du Quebec will continue as an investor and a small amount of debt will be converted into equity. Rose expects a positive reevaluation soon after the agency considers the new structure, which could be finalized and made public within the next two weeks.
Avison is a competitor of companies such as CBRE Group Inc., which provides real estate sales, property management, leasing and other services in the commercial real estate field. The performance has been weak as the commercial real estate market is experiencing its worst downturn in a generation.
In September, S&P lowered Avison Canada's rating to CCC with a negative outlook, saying the company needed additional funding sources. S&P said at the time that Avison had net cash outflows from operations (excluding cash interest payments) of about C$23 million ($17 million) in the first half of last year, due in part to lower capital markets and lease income.
(Updates with quote from interview with Avison CEO)
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