Less than five months after raising NIS 180 million in Tel Aviv in a public bond offering, Canadian real estate company Urbancorp is nearing its end in its current format. The company has filed a request for protection from its creditors in the court in Canada, with the aim of trying to extricate itself from its difficulties by selling assets itself rather than through a receiver on behalf of the creditors.
Urbancorp filed its application under Canada's Bankruptcy and Insolvency Act, even though it undertook in its offering prospectus and in the bond trust deed that disputes with bondholders would be resolved in the Israeli courts. In order to circumvent this problem, Urbancorp filed the application through six subsidiaries (project companies) and its operations management company. This represents a warning flag for bondholders in foreign real estate companies, who believed that they were protected by undertakings in bond trust deeds from proceedings that would force them to deal with legal disputes overseas.
Urbancorp was brought to Israel in late 2015 by underwriting firm Apex Issuances, which marketed it as "one of the ten most active and largest real estate developers in Canada." The money raised was used to repay loans to local banks, and the company subsequently encountered cash flow difficulties. “We determined, after much consideration and consultation, that a court-supervised process is the best way to deal with current cash flow issues. This will allow us to reduce debt in an efficient manner while continuing to focus on our core business,” Urbancorp CEO Alan Saskin said in the company's statement. In its filing, the company said that it was requesting time to sell assets in order to obtain the maximum price for them for the benefit of its creditors and shareholders.
Meanwhile, rating company Midroog has announced that it is ceasing to rate Urbancorp's debt, after Urbancorp's three Israeli directors resigned last Wednesday, and its Israeli internal auditor resigned on Thursday, leading the Tel Aviv Stock Exchange to halt trading in its bonds. In November, Midroog gave Urbancorp the fairly high rating of A3.
Published by Globes [online], Israel business news - www.globes-online.com - on April 24, 2016
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