MONITOR S REPORT TO THE CREDITORS ON THE HUSH DISTRIBUTION FUND

Transcription

1 MONITOR S REPORT TO THE CREDITORS ON THE HUSH DISTRIBUTION FUND

2 TABLE OF CONTENTS INTRODUCTION... 1 TERMS OF REFERENCE... 2 OVERVIEW OF THE HUSH DISTRIBUTION FUND... 3 ACTUAL AND PROJECTED MONITOR EXPENSES... 7 PAYMENTS MADE FROM THE HUSH DISTRIBUTION FUND... 7

3 INTRODUCTION 1. A partially consolidated Plan of Compromise and Arrangement dated November 12, 2015 (the Plan ) was filed with the Ontario Superior Court of Justice (Commerical List) by the Applicants and a Sanction and Vesting Order sanctioning and approving the Plan was issued by the Court on January 15, Copies of the Plan, the Meeting Order, the Meeting Materials (as defined in the Meeting Order), the relevant Plan Documents (as defined to in the Plan) (the Relevant Plan Documents ) and all Monitor s reports, Orders, and all other court materials filed in these proceedings can be found on the Monitor s website at (the Website ). Capitalized terms not defined in this Report have the meanings ascribed to them in the Plan and the Meeting Materials. 3. The purpose of this report (the Report ) is to provide the Plan Creditors with an update on: a) the build-out of the Mont Palais Project including the projected amount and timing of payment of the MP Profit Participation to the HUSH Distribution Fund; b) the build-out of the Thorny Brae Project including the projected amount and timing of payment of the TB Profit Participation to the HUSH Distribution Fund; c) the projected amount and timing of payment of the Coronation Profit Participation and the Silverthorn Profit Participation to the HUSH Distribution Fund; d) actual and projected Monitor Expenses; and e) all payments made from the HUSH Distribution Fund on account of Monitor Expenses and Creditor Payment Rights. 1

4 TERMS OF REFERENCE 4. In preparing this Report, the Monitor has relied upon unaudited financial information provided by the MarshallZehr Group Inc. ( MZ ), MZ s records, financial statements, forecasts, budgets and discussions with the MZ s management and employees. While the Monitor reviewed various documents provided by MZ and believes that the information therein provides a fair summary of the transactions as reflected in the documents, such work does not constitute an audit or verification of such information for accuracy, completeness or compliance with Accounting Standards for Private Enterprises ( ASPE ) or International Financial Reporting Standards ( IFRS ). Accordingly, the Monitor expresses no opinion or other form of assurance pursuant to ASPE or IFRS with respect to such information. 5. The Monitor cautions Creditors that the estimated proceeds of the Build-out Value payable to the HUSH Distribution Fund set out in this Report are based on several assumptions, best estimates and judgments, as well as information available and known at the time of the development of the budgets, giving all of the foregoing due consideration as to materiality. The estimates reflect current general economic, housing market and construction market (i.e. labour and materials) conditions. They also assume a continuation of current municipal government planning policies and priorities, as they are highly dependent on the nature and timing of municipal land use approvals. The estimates were considered to be reasonable at the time of preparation. However, as with all such assumptions, there is a measure of uncertainty surrounding them. Actual results are almost certain to vary from such estimates and the variances may be material. This uncertainty increases as the forecast horizon of the projection extends over several years. 6. All references to dollars are in Canadian currency unless otherwise stated. 2

5 OVERVIEW OF THE HUSH DISTRIBUTION FUND 7. The Plan provided for the creation of the HUSH Distribution Fund to enable Plan Creditors to participate in the increased value created from the build-out of the Projects, in particular the Mont Palais Project and the Thorny Brae Project. 8. Pursuant to the CMA: a) the HUSH Distribution Fund will receive 100% of the Build-Out Value of the Silverthorn Project after payment of the New First Mortgage, New Second Mortgage, and the New CVC Third Mortgage and any other amounts in priority to such mortgages; and b) the HUSH Distribution Fund will receive 100% of the Build-Out Value of the Coronation Project after payment of the New First Mortgage and New Second Mortgage and any other amounts in priority to such mortgages. 9. Pursuant to the TB Profit Participation Agreement, the HUSH Distribution Fund will receive 70% of the Build-out Value of the Thorny Brae Project after repayment of the Land Costs, Build-Out Costs and Restructuring Costs and subject to the First TB VTB. 10. Pursuant to the MP Profit Participation Agreement, the HUSH Distribution Fund will receive 70% of the Build-out Value of the Mont Palais Project after repayment of the Land Costs, Build-Out Costs and Restructuring Costs and subject to the First MP VTB. HUSH Distribution Fund Estimated Amount Payable as at November 27, As at November, 27, 2015, the projected conservative Build-out Value for the Mont Palais Project was $2,740,782 and the projected conservative Build-out Value for the Thorny Brae Project was $4,486,841. 3

6 12. As reported in the Monitor s Report on the Plan dated November 27, 2015, based on the build-out budgets as at November 11, 2015, the estimated proceeds of the Buildout Value of the Projects (70% of Build-out Value) payable to the HUSH Distribution Fund for distribution to Plan Creditors and payment of the Monitor s expenses were as follows: Conservative Estimated Realizations Optimistic Estimated Realizations $ Silverthorn Project - - Coronation Project - - Mont Palais Project 1,918,547 2,925,035 Thorny Brae Project 3,140,789 5,045,966 5,059,336 7,971,002 * Refer to disclaimer in paragraph 5 of this Report HUSH Distribution Fund Estimated Amount Payable as at July MZ has provided updated build-out budgets as at July 2016 for the Mont Palais Project and the Thorny Brae Project. As at July 2016, the projected conservative Build-Out Value for the Mont Palais Project is $390,130 and the projected conservative Build- Out Value for the Thorny Brae Project is $2,531, The estimated proceeds of the Build-out Value of the Projects payable to the HUSH Distribution Fund (70% of Build-out Value) for distribution to Plan Creditors and payment of the Monitor s expenses are as follows: Estimated Realizations $ Silverthorn Project - Coronation Project - Mont Palais Project 273,091 Thorny Brae Project 1,772,363 2,045,454 4

7 Mont Palais Project 15. With respect to the Mont Palais Project, the estimated proceeds payable to the HUSH Distribution Fund has decreased by $1,645, Overall, the Mont Palais project has experienced delays due to a requirement to obtain draft plan approval for the development resulting from the expiry of the original draft plan approval and subsequent change to the designation for the road requiring the developer to obtain a new draft plan approval for the development. This resulted in an unanticipated 6-month delay. As well, new servicing agreement requirements increased the construction delay by another 2 months. 17. Specifically, the negative estimated realizations variance is the result of projected negative variances for: a) Hard construction costs in the amount of $780,000 due to a general increase in costs for inflation resulting from delays; b) Architecture, engineering and planning and code consultant costs of $150,000; c) Administration and marketing of $423,000 due to projected increases for realtor commission rates, marketing fees and site drawing and Tarion bonding fees; d) Financing costs of $1.48 million due to a delay in project completion and a greater amount of mezzanine debt compared to bank financing which would be at a lower interest rate; Offset by positive variances for: a) Residential unit sales in the amount of $164,000; and b) Contingencies in the amount of $307,000 Thorny Brae Project 18. With respect to the Thorny Brae Project, the estimated proceeds payable to the HUSH Distribution Fund has decreased by $1,368,426. 5

8 19. Overall, the Thorny Brae project has experienced delays resulting from two squatters on the Thorny Brae Lands which took 8 months to evict. Draft plan approval has been submitted to the municipality and is expected to be received by January Specifically, the negative estimated realizations variance is the result of projected negative variances for: a) Residential unit sales in the amount of $518,000 due to a decrease in the number of units in the development; b) Hard construction costs in the amount of $2.33 million for an increase of $20 per sq. ft for projected upgrade costs and inflation (accounting for expected construction start dates) and a requirement for one of the homes to be a heritage home which increases construction costs; c) Architecture, engineering and planning and code consultant costs of $153,000; d) Financing costs of $1.53 million due to a delay in project completion and a greater amount of mezzanine debt compared to bank financing which would be at a lower interest rate; Offset by positive variances for: e) Development charges in the amount of $1.36 million due to less costs related to municipal charges and servicing costs resulting from a decrease in the number of units in the development; f) Administration and marketing in the amount of $460,000 as MZ is of the opinion this amount was too high and anticipates the homes selling quickly once marketed; and g) Contingencies in the amount of $765, As at July 2016, the expected completion of the build-out of the Mont Palais Project is August 2018 and the expected completion of the build-out of the Thorny Brae Project is December

9 Silverthorn Project and Coronation Project 22. As reported on in the Monitor s Report on the Plan, there are no estimated proceeds payable to the HUSH Distribution Fund from the Silverthorn Project and Coronation Project. ACTUAL AND PROJECTED MONITOR EXPENSES 23. As at July 2016, actual Monitor Expenses (excluding expenses of the Monitor s legal counsel) incurred and to be paid out of the HUSH Distribution total $9, exclusive of HST. The Monitor has a retainer of $100,000 to be used to pay the Monitor s Expenses. 24. The projected amount of Monitor Expenses is dependent on the timing of the build-out of the Thorny Brae Project and Mont Palais Project. The Monitor will provide an estimate in its next report. PAYMENTS MADE FROM THE HUSH DISTRIBUTION FUND 25. As at July 31, 2016, no payments have been to or from the HUSH Distribution Fund. 7