The collapse of Victoria-based League Assets, unfolding in grim fashion in B.C. Supreme Court, isn’t getting nearly enough media attention.
By the time the dust settles, this will be one of the worst investment disasters in Canadian history.
Investors will likely get back about ten cents on the dollar as the complex web of companies is wound up.
Some 3,200 investors gave League $363 million. League claimed to offer small investors a way into the commercial real estate market. The company promised security and great returns.
Those investors now face ruin. There will likely be less than $40 million for them to share at the end of the process.
League filed for protection under the Companies’ Creditors Arrangement Act last month. Essentially, that allows a company that can’t pay its bills time to try and find a solution.
But it’s clear there is no solution. League’s assets, including the commercial real estate holdings and development projects like Colwood Corners, are worth far less than the company claimed and heavily leveraged.
CEO Adam Gant filed an affadvit last month saying the real estate had a net value of $211 million. PWC, the monitor overseeing the CCPA process, commissioned an appraisal that found the real current value is $82 million.
A lawyer for the main secured creditors summed up the situation in a letter to the court this week pointing out restructuring is not an option.
“In fact, it appears that there is no “business” to restructure in any event: League Assets depended for its short-lived success on continued growth and injections of new debt, new investment, and new acquisitions that would generate fees for the management or “head office” entities,” he writes. “When the money stopped coming in, the whole edifice appears to have quickly collapsed under its own weight.”
The consequences are disastrous. Rachelle Berube, a blogger who was being sued by League for comments on her blog that described the business as a Ponzi scheme, has tracked League for some time.
She shared case studies from the company’s sales material, which include investors who talk about mortgaging their homes to invest in League and counting on the investments for their retirements.
PWC noted in a monitor’s report that this week that investors and creditors are looking at the “significant amounts” invested in League and the low value of the assets and wondering “Where the money went.”
That’s likely to become a larger question as investors confront the loss of their savings.