Embattled Vancouver developer in court over $700 million in debt

A Vancouver developer which owes hundreds of millions of dollars to creditors for loans secured against 16 parcels of land and related real estate projects was in B.C. Supreme Court Thursday to shed some of the properties and seek more time for an orderly sale of the rest as it struggles to stay afloat.

The properties and projects have a combined value of about $1 billion and Coromandel Properties owes $700 million in debt secured against them.

On Thursday, at least 17 lawyers representing various lenders, construction firms and financial institutions gathered in court as the company set out a plan to proceed with a Companies’ Creditors Arrangement Act (CCAA).

Of the 16 properties owned by Coromandel, it only wants to include six of them in the CCAA, a legal mechanism to buy time while the company attempts to restructure its debt.

The court heard Thursday that the company has defaulted on its debts and has been unable to pay interest owed on the hundreds of millions of dollars in loans.

The six properties Coromandel wants included in the CCAA, and thereby temporarily protected from creditors, are said to have a greater value than the total debt secured against them and the developer wants time to market and sell them in a coordinated manner.

“If the lands are sold outside an orderly sales process, value will be lost to stakeholders,” Coromandel’s director Zhen Yu Zhong said in an affidavit submitted to the court.

The other ten properties are believed to be underwater because the amount of debt secured against them is higher than their appraised value.

They will not be included in Coromandel’s CCAA and the affidavit says they will be dealt with separately instead in negotiated agreements with the company’s creditors and/or other potential interested buyers.

On one of those properties known as Southview Gardens, the developer has loans totalling $80 million from three different creditors.

Coromandel had hoped to one day redevelop the aging townhouse complex and in the meantime has maintained and operated the rental property for existing tenants.

The court heard Southview Gardens currently generates almost $250,000 a month in revenue, but that is not enough to service the interest on the loans against it – which Coromandel has now defaulted on.

The judge agreed that a third party should assume control of the property and oversee its finances and operations.

Zhang’s affidavit also says Coromandel has cut its cost by laying off seven employees but still has a staff of 23 on its payroll.

In order to maintain a positive cash flow and keep the company solvent as the court proceedings progress, Zhang has promised to inject $1 million of his own money into Coromandel.

The company and its creditors will be back in court next month for arguments on the proposed CCAA.