Avison Young Default, Downgrade Pave Way for Restructuring
The slump in CRE transactions took a toll on the firm. What’s next?
The situation reached a turning point last Friday, when S&P Global Ratings cut Avison Young’s issuer credit rating to “SD” (selective default) from “CCC” and lowered the issue-level rating on a $325 million senior secured term loan to “D” from “CCC-.”
The rating agency’s actions stemmed from Avison Young’s defaults on required quarterly principal and interest payments in the third and fourth quarters on its senior secured term loan.
S&P acknowledged that the Toronto-based company “remains current on its debt service obligations under its revolving credit facility.” The agency nonetheless revised its assessment of Avison Young’s management and governance from “moderately negative” to “negative.”
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Yesterday, Avison Young said it is agreeing to “a comprehensive deleveraging transaction with its current financial partners” and declared that by taking this course of action, it “reduced its financial obligations by more than half and has secured additional capital…”
Avison Young CEO Mark Rose touted, in a prepared statement, the company’s incipient “more sustainable capital structure” and said that its principals and management will retain a significant majority ownership stake in the company. That presumably includes the company’s nearly 700 partners.
All of this comes just weeks after Avison Young bought another slice of Madison Marquette, this time specialty leasing, retail property management, marketing and leasing businesses.
The restructuring transaction should close in March. Centerview Partners LLC, Kobre Capital LLC and Long Castle Advisors Corp. served as financial advisors. Meanwhile, Stikeman Elliott LLP (Canada), McDermott Will & Emery LLP (U.S.), and DLA Piper LLP (U.S. and U.K.) served as legal advisors. C Street Advisory Group served as communications advisor.
Avison Young restructuring news: Reactions, reverberations
Understandably, the pace of news over the weekend was rapid.
On Saturday, Bloomberg reported that Rose had stated that the restructuring will eliminate “significantly more than 50 percent” of Avison Young’s obligations, and that the company’s board will no longer have non-independent directors. Rose also called the default “purely technical,” as it was based on a non-repayment that Avison Young and its lenders had agreed on as part of the pending restructuring.
Meanwhile, Bisnow reported, based on an interview with Rose, that the senior term loan had been taken out in 2019 to fund the acquisition of U.K. brokerage GVA Grimley and to pay down debt that was maturing in 2021. Also in the picture are a $60 million revolving credit facility and a $65 million equity investment from Canadian pension fund Caisse de dépôt et placement du Québec, which had provided Avison Young with a $250 million equity investment in 2018.
The Avison Young board will be slashed from 11 to just five members. Besides Rose, the new board will have two independent directors appointed by the company and two appointed by its lenders, according to Bisnow.
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