Parent company of Regus co-working spaces files for creditor protection - InfoNews

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Parent company of Regus co-working spaces files for creditor protection

September 03, 2020 - 4:24 PM

TORONTO - Co-working company IWG, which owns on-demand office brands Regus and Spaces, is seeking creditor protection in Canada precipitated by COVID-19 lockdowns.

The company says it has reached an impasse in negotiations with some of its landlords, after the COVID-19 pandemic forced many occupants to either work from home or offer late payments.

Without creditor protection, the company says it could face a “lockout” from Canadian landlords that could be triggered if the U.S. guarantor for 39 leases files for insolvency in the United States, a move that would affect 3,000 of the 15,000 Canadian occupants. The other locations operate under different leases.

"Protection under the CCAA will bring immediate stability to a volatile situation where a significant portion of the Canadian Centres could be involuntarily closed on no or limited notice," said a court filing in the Ontario Superior Court.

"The CCAA Debtors intend to use the 'breathing room' provided by the CCAA to advance their restructuring efforts in a co-ordinated manner with the Chapter 11 Cases."

Its concerns about lockouts were heightened when an Edmonton landlord posted a notice to immediately terminate the lease on Aug. 25 citing the bankruptcy filing by the U.S. arm of IWG with the United States Bankruptcy Court on Aug. 17.

"Staff located at the premises were forced to set up a table outside the premises in order to explain to occupants the lock out situation causing significant disruption to the operation of the company and the occupants," said the court filing.

The Aug. 30 request under the Companies’ Creditors Arrangement Act was posted online by trustee KSV Advisory Inc.

The creditor application affects 39 of 137 leases in Canada that are guaranteed by the IWG entity in the U.S.

Thirty-seven of the applicants are corporations incorporated in Ontario and two in British Columbia.

The CCAA application affects 22 of 69 locations in Ontario, five of 29 in B.C., six of 15 in Alberta, five of 17 in Quebec, zero of one in Saskatchewan, zero of three in Nova Scotia and one of two in Manitoba.

It said the pandemic depressed occupancy rates, with some failing to pay their fees and decreasing demand in centres in downtown or metro centres.

Nonetheless, it said most of the Canadian tenants continued to pay landlords. But Canadian affiliates are in rent arrears totalling about $2.2 million, including $850,000 owed from affiliates that are part of the court application, said the filing.

The debtors owe RGN Management LP $14.38 million for services that they pay for a management fee equal to 13.5 per cent of revenue generated at the centres.

This report by The Canadian Press was first published Sept. 3, 2020.

News from © The Canadian Press, 2020
The Canadian Press

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