Balboa Inc. et al., which specialize in the acquisition, renovation and leasing of distressed residential real estate in undervalued markets throughout Ontario, obtained CCAA protection on January 23.

The companies currently own 405 residential properties with an estimated aggregate appraised value of approximately $173 million in secondary and tertiary markets in Ontario, as well as a non-operating golf course. The purchase and renovation of the properties were financed through mortgage loans and unsecured promissory notes held by hundreds of thousands of real estate investors.

The companies have struggled to generate sufficient free cash flow to support their ongoing payment obligations and currently have liabilities of over $100 million. Despite exploring options for a refinancing or sale in the beginning of 2022, the companies have been unable to obtain a comprehensive solution. They face a severe liquidity crisis and are generally unable to meet their obligations as they become due, with less than $100,000 of cash on hand.

The companies have received over 50 demand letters, notices of default, notices of intention to enforce security and notices of sale under mortgage, and are named in approximately 32 claims filed in the Ontario Superior Court of Justice.

The principal purpose of the CCAA proceedings is to create a stabilized environment to allow the companies to complete value accretive renovations to their portfolio of residential homes, pursue a comprehensive refinancing or restructuring transaction and implement a consensual plan of compromise or arrangement while continuing operations in the ordinary course of business.

KSV was appointed monitor. Howards Capital Corp. is the proposed financial advisor.

Counsel is Bennett Jones for the companies, Cassels for the monitor, Blakes for the proposed financial advisor and Chaitons as representative counsel for the investors.

By: Dina Milivojevic