The head of beleaguered Toronto property developer Urbancorp said his company has been forced to lay off employees and scale back future development as it grapples with "cash flow challenges" and an international legal skirmish between creditors in Canada and Israel.
In a lengthy statement e-mailed late Thursday night, Urbancorp chief executive officer Alan Saskin wrote that he wanted to correct "misperceptions" about the company's announcement last week that it had filed for bankruptcy restructuring, its decision to raise money on the Tel Aviv Stock market and what he described as the company's "differences" with Tarion, the administrator of Ontario's new home warranty program, over its plan to revoke warranties on 17 Urbancorp projects.
"Events leading up to initiation of the court process last week were moving quickly," Mr. Saskin wrote. "Given the international complexities and the number of stakeholders involved (home buyers and homeowners, creditors, shareholders, suppliers, construction trades and regulators), we were unable to keep everyone apprised of all developments at all times."
Since April 21, the developer filed for bankruptcy restructuring for subsidiaries connected to seven planned freehold housing projects in Toronto, along with its management arm, Urbancorp Toronto Management.
The filing allows Urbancorp to deal with its debt load by selling assets through a court-supervised process. "We are committed to a transparent process that will stabilize operations, preserve and protect asset values for stakeholders, and pursue the orderly sale process we have begun," Mr. Saskin wrote.
Urbancorp has also appealed Tarion's threat to revoke warranties for some of the developer's projects. Mr. Saskin wrote that the appeal process could take several months, but is not expected to affect any of the homes Urbancorp now has under construction.
Mr. Saskin also acknowledged that the company was facing angry investors in Israel, where it raised the equivalent of $60-million in bonds on the stock market last December, many of which were bought by Israeli mutual funds. At the time, Urbancorp signalled the money would be used, in part, to pay off an unsecured, $50-million high-interest loan from a non-bank Canadian lender.
The company's bonds have ceased trading after news of the bankruptcy filing made its way to Israel. The Israel Securities Authority has launched an investigation and earlier this week a Tel Aviv court appointed a representative for Israeli bondholders as an officer of Urbancorp with powers to seize assets in hopes of recovering funds for investors, Israeli media reported.
The dual court proceedings in both Canada and Israel are a complicating factor in the company's plans to sell some of its projects and pay down its debts.
"We engaged reputable advisers in Israel, and were also guided by Canadian advisers familiar with the Israeli market," Mr. Saskin wrote. "Urbancorp followed procedures they recommended and approved. Nevertheless, our cash flow challenges in Canada have led to legal proceedings in Israel as well."
Much of Mr. Saskin's statement was dedicated to defending his company's 25-year track record of building more than 5,500 condominiums and freehold homes in the city.
"Urbancorp has redeveloped over 100 acres of former industrial lands, turning them into thriving downtown neighbourhoods, home to thousands of families," he wrote. The company said it has also installed green geothermal energy in more homes than any other builder in the city and was on the forefront of redeveloping trendy neighbourhoods such as King West Village and West Queen West.