The president of Groupe Sélection, Réal Bouclin, is losing patience with the judge overseeing the restructuring of the insolvent company. In his most recent decision, Michel Pinsonnault is not kind to the tactics of the businessman, whom he accuses of a lack of “good faith”.
At the same time, the magistrate rejects the challenge of the real estate developer and manager of residences for the elderly (RPA), which allows the controller to auction the interests held by Selection in 25 complexes. The offer from its financial partner Revera – the price of which has not been disclosed – will serve as a “priming bid”.
It is above all the remarks of Judge Michel Pinsonnault regarding the “directing mind” of the company that attract attention when reading the 40-page judgment rendered last Friday.
“The lawyer for the lenders was right to wonder whether Mr. Bouclin is more concerned with prioritizing his personal interests to the detriment of his fiduciary duty as a director and officer of Sélection and its various companies,” he wrote.
Sélection objected to the mechanism proposed by the controller, judging the price offered by Revera to be “insufficient”. But it is not with a “new legal debate […] at high costs” that we will be able to “stop the financial haemorrhage” within the RPA giant – whose monthly operating loss is at least 7 million –, decides judge Michel Pinsonnault.
A hefty bill
The restructuring of Sélection, which turned towards Companies Creditors Arrangement Act (CCAA) last November, is costly. More than 12 million will have been swallowed up in “professional fees” by June 24, according to PwC forecasts.
Drawn from the interim financing offered by the bankers of Selection, this sum was used in particular to remunerate PwC, the firm responsible for the financial recovery, but also the company’s lawyers. Judge Michel Pinsonnault suggests that the president of Sélection is trying to take advantage of this situation.
It is not because the Selection fees are covered so far by the interim financing that [l’entreprise et ses entités] can act as if it were an open bar.
Excerpt from the judgment of Judge Michel Pinsonnault
By email, the company qualified this remark by Judge Pinsonnault by stressing that the “fees budgeted by the controller for Selection represent less than 10%” of the total bill of 12 million. She also expressed her disappointment that the court gave the green light to the sale of a portfolio “for less than 50% of its value”.
In the portfolio of 25 RPAs, Revera’s ownership percentage stands at 75% for 17 residences. For 7 other complexes, Revera holds 50% interests in addition to owning 85% of another RPA. The rest of the holdings belong to Sélection.
Relation difficile
The way things are going, the judge says he has difficulty seeing “a manifestation of good faith and collaboration” emanating from Mr. Bouclin and Selection.
Judge Michel Pinsonnault recalls that the 25 RPAs held jointly with Revera should not remain in the bosom of Sélection at the end of the financial recovery. It is therefore reasonable to wonder why the businessman was opposed with “so much vehemence” to the proposal on the table.
“The court would have liked to hear Mr. Bouclin’s explanations on this subject if other considerations existed,” said judge Michel Pinsonnault, deploring that his recent calls for collaboration between the businessman and his bankers did not did not have the desired effect.
We also learn in the decision that almost all of the 25 RPAs held by Sélection and Revera are loss-making.
The cash deficit stood at around 32 million last year and is likely to be similar in 2023. In addition to this are capital expenditures which will have to be subject to new calls for funds since the RPAs are deficit.
Manager of the complexes, Sélection had forecast expenditures of 27 million in 2023. This target was however reduced to 2.9 million since the insolvent company does not have the funds available to carry out the work.
Learn more
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- 6000
- Number of housing units in the 25 RPAs owned by Sélection jointly with Revera
Source : pricewaterhousecoopers
