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Avison Young CEO Mark Rose in Toronto on June 7, 2022.Christopher Katsarov/The Globe and Mail

Avison Young’s chief executive says it did not default on debt payments and that its lenders have agreed to forgive more than half the amount owed, after the major commercial real-estate firm was downgraded by a top credit-rating agency.

The Canadian company, whose services include brokering office leases and appraising property, was slapped Friday with a “selected default” by S&P Global Ratings for failing to make payments on its US$325-million loan in the third and fourth quarters of last year. The rating reflects a default on one or more of a company’s financial obligations.

Avison’s loan has a variable interest rate, which is based on central banks’ benchmark rates and which became increasingly expensive as banks hiked rates to squash inflation. The higher borrowing costs along with the slowdown in property sales and demand for commercial real-estate services have hurt the company and the rest of the industry.

Avison CEO Mark Rose told The Globe and Mail that the company has been working on a plan to improve its balance sheet, and has an agreement with its approximately 25 lenders to not pay the interest or principal because they were restructuring the company’s finances.

“We haven’t missed any payments,” Mr. Rose said in an interview Saturday. “We have had an agreement for months not to pay.”

He said Avison did not pay the interest on the loan in the fourth quarter as per their agreement and that lenders have agreed to forgive more than 50 per cent of his company’s debt obligations in a scheme that will be finalized within the week.

Mr. Rose said Avison told the credit-rating agencies last week that it had an arrangement with its lenders not to make debt payments. But since Avison did not make the payments, S&P downgraded the company’s credit.

“From a practical point of view, yes, they got it completely wrong. From a technical point of view, you know, they gotta do what they gotta do,” he said.

S&P also dinged the company’s management and governance, and said it changed its view on the team to “negative” from “moderately negative.”

Mr. Rose said his lenders had advised him not to tell the rating agencies earlier.

S&P spokesperson Alexis Weakley said it expects to review its credit rating on Avison “when we receive additional information about its intentions to meet these and other financial obligations.”

Mr. Rose said that, as part of the deal, his lenders will continue to back the company with new loans as Avison sets off on its next stage of growth.

Mr. Rose would not disclose the names of his lenders except to say they were based in the U.S. and that the group included the Caisse de dépôt et placement du Québec. A spokesperson for the pension fund, Conrad Harrington, declined to comment.

Mr. Rose said Avison’s new loan will have a fixed interest rate, which means it will remain the same for the term of the loan.

The CEO said that his firm’s growth will continue as planned. He expects to double staff and locations over the next five years. He said Avison will also be making a big investment in artificial intelligence.

That will build on Avison’s expansion, which started in 2018. Since that time, the company has doubled the number of real-estate professionals to 5,000 and has more than 100 offices in 19 countries. It recently announced a move into Croatia with a new office in Zagreb.

Avison is one of five major full services commercial real-estate firms in Canada that broker leases, value commercial real estate and provide research, among other services.

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