Toronto-headquartered Avison Young has defaulted on a $325m (£256m) senior term loan, missing principal and interest payments over the last two quarters, according to ratings agency S&P Global.
S&P has downgraded the agency’s corporate credit rating to selective default, with its senior loan term downgraded to default.
The ratings agency said: “The downgrade follows our recent receipt of information regarding Avison Young’s non-payment of the required quarterly principal and interest payments on its senior secured term loan. The company failed to make third- and fourth-quarter 2023 principal and interest payments on its senior secured term loan.
“The company remains current on its debt service obligations under its revolving credit facility. In addition to taking the rating action, our assessment of information received from the company has led us to revise our assessment of management and governance on the issuer to negative from moderately negative.”
The note added: “We expect to review our issuer credit rating on Avison Young in the coming weeks when we receive additional information about its intentions to meet these and other financial obligations.”
AY is understood to have fully expected the downgrade, as it has been in talks with its lenders to restructure its debt. Those talks include reducing its debt burden by more than half and bringing its debt and interest rates in line with profitability and cashflow, an injection of new capital from existing lenders and a restructure of the firm’s board, led by Mark Rose as chair. Rose was chief executive of Avison Young.
The firm said: “Avison Young has finalised a milestone transaction with its financial partners to significantly strengthen its balance sheet and infuse new capital to invest in its client solutions, team, and global operations.
“This transaction is an exciting step forward for Avison Young and will allow the company to better serve its clients and partners well into the future. With an improved financial foundation, Avison Young is well equipped to grow and continue providing innovative solutions as the commercial real estate market recovers in the coming years.”
AY took out a $325m senior loan in 2019 to fund its acquisition of GVA Grimley and a $50m senior loan in 2022. Both mature in January 2026 and both are in default.
The company’s credit was downgraded to junk status in September after S&P determined its liquidity was eroding with less revenue coming in and interest rates going up.
AY has been seeking to shore up its finances and business for almost two years, launching a redundancy programme in the UK, US and Canada in November 2022 in a bid to cut some C$25m (£14.6m) of costs.
Nick Walkley, who joined AY in September 2021 from Homes England, has been on a mission to restructure the business since taking over as UK boss from Jason Sibthorpe in June 2022, bringing in new people and refocusing the business on four core ambitions – to be the UK’s preferred adviser; be the people for place; have confidence about capabilities and capacity; and grow its capital markets offering.
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