Group behind $1-billion Colwood project files for creditor protection

The company behind one of the Island’s largest construction projects has been granted breathing room from creditors and time to restructure after applying to the B.C. Supreme Court for protection.

The League group of companies, which lists 105 entities under its banner in a complex corporate structure, is receiving creditor protection through the Companies’ Creditors Arrangement Act, allowing it to operate as-is under the supervision of monitor PricewaterhouseCoopers.

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League has been given a break until Nov. 18.

Under the act, a company receives an initial 30 days of protection in order to restructure and develop a plan to deal with debts and creditors.

As a general rule the courts will continue that protection as long as the company demonstrates it is likely to file a “plan of arrangement” that deals with the stakeholders. There is no limit on how many extensions a court may allow.

League is the developer of Capital City Centre, a commercial and residential complex in Colwood that is to be built over several years at a cost of about $1 billion. Work at the site stopped in the summer after the pouring of concrete for foundations.

In an affidavit, League CEO Adam Gant cited a number of factors for his company’s problems, including the 2008 credit crisis, increased demand from investors for redemptions and setbacks at its Capital City Centre and Redux Duncan developments.

Gant said League was left with a “large amount of legacy debt” as a result of the credit crisis; League projects were delayed amid a substantial drop in demand for commercial property.

He said the crisis resulted in the League group having to deal with a smaller number of lenders, generally at a higher cost, which put pressure on cash flow.

Gant said that cash flow was further strained as investors increased their demand for redemptions.

“Once the financial crisis passed, investors indicated to me that they are more interested in higher risk investments with higher returns than those offered by the League group. This has resulted in a larger than anticipated number of redemption requests,” he wrote.

Gant also noted League has had trouble securing stable funding for Capital City Centre and Redux Duncan.

At Capital City Centre, Gant said League “has been able to secure relatively expensive ‘band-aid’ solutions” but requires a stable construction financier.

In his court filing, Gant laid out the bones of a plan to simplify League operations. The plan would see League divided into three core businesses — asset management, wealth management and real estate development. League would divest underperforming assets, find stable funding to reduce interest charges and look at going public to increase equity investment and decrease credit requirements.

According to Gant’s affidavit, none of the group’s 105 employees has felt the impact of the group’s financial constraints.

The affidavit did not go into detail about the amount owed unsecured creditors. Gant said the debts consist mainly of unsecured noteholders, inter-corporate debt between League companies, trade creditors at the Capital City Centre project and firms who have provided professional and legal services.

As far as investors are concerned, Gant suggested in his affidavit that they stand to gain the most from restructuring, and are at the greatest risk of a loss should League’s assets be liquidated or foreclosed on.

In a statement issued Friday afternoon, League said: “Our assets remain strong, but unfortunately we have insufficient cash flow to meet our ongoing operational needs. The filing will provide the League Group with a defined process and the necessary time to restructure its affairs in order to emerge with a sustainable and profitable real estate development company.”

aduffy@timescolonist.com

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