A co-founder of the League Group of companies has riled League investors after sending some of them a letter claiming “all of us are in this together.”
Emanuel Arruda, who in November was ordered by the court to be removed from League’s senior management along with chief executive and co-founder Adam Gant, has penned a letter to some of the 4,200 investors who could lose as much as $370 million when League completes restructuring under the Companies Creditors Arrangement Act.
In his lengthy letter obtained by the Times Colonist, Arruda said he is in the same boat as investors and, in fact, has been “rendered effectively homeless” by the process.
“I’m truly sorry and distressed that your investment is tied up in this CCAA process. While it likely won’t make you feel any better, I felt it important that you know mine is too,” he wrote, noting he invested the bulk of his savings in League’s IGW real estate investment trust and smaller amounts in other League investment vehicles.
Arruda said he also used two personal lines of credit to borrow $150,000 to invest in League, and used a $45,000 bank overdraft to lend money to League when it faced financial difficulty.
“I believed in our investments and our mission as much as you did,” he wrote. “My own investment choices speak volumes about my intentions and expected outcomes for League and its investments, and my character.”
The letter has been dismissed by some investors who said it was difficult to read.
Arruda did not respond to questions from the Times Colonist.
PricewaterhouseCoopers, the monitor overseeing League’s restructuring, said the investor group is expected to lose most if not all of the $370 million they invested. The monitor said League owes $186 million in mortgages to 26 secured lenders and has 460 trade creditors, considered unsecured lenders, owed $19.5 million.
In his letter, Arruda said he and fellow League founder Adam Gant personally guaranteed commercial loans to secure financing for company projects. He said that because lenders have secured judgments on their personal residences, he has been unable to sell his home to pay down his debts.
“I handed the keys to my apartment over to a tenant who will pay my mortgage for at least the next year. Rendered effectively homeless, I am now staying in a friend’s spare room,” he said.
This week, League made restructuring progress with four properties now subject to pending sales agreements that have a combined listed value of $25.85 million. The properties are in Ottawa, Vernon, Langley and Stettler, Alta.
The company is trying to sell 11 of its 22 properties by June 28 to satisfy secured lenders who are owed $186 million. Total sales are not expected to fetch that price.
Eight of the 11 properties for sale have been listed for a total of $74 million, while the three others are listed without a price to let the market determine their value. Of the remaining 11 properties, three have sold, two have been handed back to the lenders who held security on them, three are being held off the market in the hope their value will increase, and three others, including Capital City Centre in Colwood, are not being sold.
Of League’s Victoria properties, 736 Broughton St. remains listed at $4.15 million, while the Residences at Quadra Village has a reduced asking price of $12.5 million, down from $14.1 million.