League group of companies founders Adam Gant and Emanuel Arruda were removed from their positions by court order Friday as part of a compromise reached between League, its secured creditors and investors that will see the company continue through a restructuring process.
Gant, the chief executive, and co-founder Arruda were replaced by League chief financial officer John Parkinson, who will act as interim CEO. Parkinson has also been charged with finding a replacement CEO over the next two months.
In an interview, Gant wouldn’t talk about leaving the company he founded, but admitted parts of the restructuring process under the Companies’ Creditors Arrangement Act have been “very emotional and trying.”
“I said at the start that nothing was sacred, we just want to make sure we get the best value out of this for investors,” said Gant, who will remain as a consultant through the creditors act process and remains as chairman of League Assets Corp.
Parkinson said the court’s approval of the compromise solution establishes a solid platform for the next phase of League’s restructuring. The company was initially granted protection Oct. 18.
“It allows us to move forward in the right way. What we are keen to do is maximize the value for investors and I’m comfortable this process allows us to do that,” Parkinson said. He noted they have the flexibility of choosing which assets to sell and when to sell them, rather than having to put them on the market “on a fire sale basis.”
The process that was approved by the court on Friday extends creditor protection until June 28, and approves $10 million in debtor-in-possession financing to allow day-to-day operations until then.
The deal was hatched between League, the majority of its secured creditors and the representative counsel acting on behalf of investors as an alternative to what was expected to be expensive and distracting litigation and a possible receivership process.
The order expands monitor PricewaterhouseCoopers’ role to include overseeing a new CEO, taking possession of all money owed to League group and its bank accounts, overseeing all payments over $5,000, reviewing and investigating the books and conducting a review of the 65 League entities not involved in the creditors act process.
The process will establish an orderly sale of assets, maintain League’s ability to put forward a restructuring transaction and gives League breathing room with respect to the Capital City Centre project in Colwood.
Gant said League now has six months to find a way to get the Colwood Corners project started again after the site was idled in July due to lack of construction financing. He hopes they can find a development partner or a means of refinancing the project to at least finish the first phase of what was to be a $1 billion build-out.
“Our goal is to figure out the best way to get construction going and ensure the maximum financial value,” Gant said, noting they have six months before any of secured lenders can act to realize their security on the property.
According to the monitor’s report, the breathing room was granted because the estimated value of the property in a sale would be less than the amount owed to secured creditors of the property.
The court also approved the sale of League’s holdings in Partners REIT. That sale to McCowan and Associates Ltd. for $27.1 million will pay $17.4 million to Firm Capital and nearly $10 million to Timbercreek which holds a security tied to those holdings of $13.5 million.
Following a heavy court schedule this week and what has been, at times, an acrimonious relationship with lenders, Parkinson said he was a little surprised. “I don’t think we anticipated we would have such a strong reaction from our secured lenders,” he said. “We have been working hard with the various lenders to get to this compromise position and, frankly, I thought we would get here more easily and in a quicker manner.
“It’s been a bit of a fight and that for me has been a bit of a disappointment in that it has taken as much time and effort.”
Gant echoed that sentiment, noting the League group always believed secured lenders had plenty of security, and that League saw the creditors act process as a means to deal with the complex structure of the company and improve its debt position. “It was amazing to see the push back from lenders,” he said.