Narrative
Full Description
Project narrative
On May 19, 2021, Visionary Education Technology Holdings Group Inc. (later renamed in 2024 to Visionary Holdings Inc.) — an Ontario-incorporated Canadian private education provider headquartered in Markham, Ontario and listed on the Nasdaq Capital Market in the United States — entered into a purchase agreement to purchase two office buildings — a five and 11-story office complex with a total floor area of 433,000 square feet at 95-105 Moatfield Drive in Don Mills, North York, Toronto, Ontario, for a total price of $93.3 million CAD ($68.7 million USD) from Slate Office REIT. The acquisition was completed on September 23, 2022. The Bank of China (Canada) (BOC) entered into a $60 million CAD ($44.3 million USD) bilateral loan agreement with 13995291 Canada Inc. — a Toronto, Ontario-incorporated wholly-owned subsidiary of Visionary Education Technology Holdings — to support the purchase of the buildings. The loan carried a maturity period of two years and a final maturity date October 15, 2024, with a flexible interest rate based on a prime variable rate plus a margin of 1% per annum, with equal monthly instalments ($403,251 CAD) of blended principal and interest over an amortization period of 25 years, and a grace period of about six months (0.5 years). This loan carried a financial covenants that 13995291 Canada would have to maintain the debt service coverage ratio above 1.25. This loan was secured by (i.e. collateralized against) the two office buildings at 95-105 Moatfield Drive as charged by 13995291 Canada. Miss Fan Zhou, the chief executive officer and major shareholder of Visionary, issued a personal guarantee of the loan. Visionary Education Technology Holdings issued a guarantee for the loan. The buildings were formerly the Canadian headquarters of IBM and Kraft Heinz. Visionary planned to develop them into the Visionary University Town, which be the foundation for the development and allow expansion of its business by becoming a comprehensive university facility focused on digital arts as well as film and animation production; Visionary also planned to build two student apartment buildings, expand the sports field, and open dining facilities. As of March 31, 2023 and 2024, the loan was in default due to an unauthorized $5 million CAD private mortgage registered on title to the Moatfield properties in favor of a company listed as 1000386642 Ontario Inc. placed without BOC (Canada)'s consent, with the outstanding balance was on demand at BOC’s call. The borrower began making late payments on the loan in March 2023, with late repayments in August and November 2023 and five between March and July 2024. As of July 4, 2024, the borrower still owed $59,753,654 CAD to the bank. On July 5, 2024, BOC (Canada) issued a demand letter and a notice of intention to enforce security on the grounds that Visionary looked unable to repay the debt on time. The payment scheduled for July 15, 2024 went unpaid. On August 1, 2024, BOC (Canada) filed an application under section 243(1) of the Bankruptcy and Insolvency Act (BIA) and section 101 of the Courts of Justice Act (CJA) requesting that Ernst & Young Inc. be appointed as receiver of the buildings for them to be sold, listing a number of alleged grievances, including Visionary's failure to make certain tax payments to the Canada Revenue Agency (CRA), which left CRA demanding $1.18 million CAD and placing a lien on the property, which was eventually revoked, without BOC (Canada)'s consent, Visionary's failure to make any municipal tax payments, Visionary's allowance of a construction lien in favor of construction company Arguson Projects Inc. without BOC (Canada)'s consent, that Visionary's sole income was sourced from tenant rent payments, which was of a concern to BOC (Canada) because it had been failing to remediate rent arrears of up to potentially 18 months from certain tenants that would impact the collateral value, structural and safety issues with the property's underground parking garage that would cost $700,000 CAD to repair that BOC (Canada) assessed the borrower did not possess, potential decline in site maintenance due to low cashflow that could lower the property's value, and the unauthorized private mortgage — made more time-sensitive because on May 24, 2024, solicitors for 1000386642 Ontario Inc. issued a notice of sale that demanded payment of the $5 million CAD mortgage and $103,000 CAD in interest by July 5, 2024, else the property would be sold; 1000386642 Ontario Inc. then entered into a forbearance agreement with Visionary, which pushed the potential sale to the end of August — arguing that the property needed to be sold transparently and under the supervisions of courts to protect the registered interests of the multiple secured parties and the rights and interests of existing tenants. For its part, Visionary claimed that it paid all rents and "most, if not all" of the maintenance costs, though declined to mention the failed federal and municipal tax payments, the late scheduled payments, the construction lien, or the $5 million CAD mortgage in an affidavit that was due August 12, 2024 but only delivered on August 24, 2024, in breach of the Ontario Superior Court's orders. Visionary alleged that BOC (Canada) was attempting to bypass Visionary by selling the property to one of the tenants, Hitachi Rail, for $65 million CAD when a Colliers Appraisal Report found the property to be worth $80 million CAD, and that selling low would harm the company's stock price, allegations BOC (Canada) and Hitchai Rail denied. On August 27, 2024, a justice of the Ontario Superior Court of Justice appointed Ernst & Young Inc. as receiver of the property, putting in charge of managing and operating it and facilitating its potential sale. On September 2, 2024, Visionary signed a Memorandum of Understanding (MOU) with the Public Investment Fund (PIF) of Saudi Arabia, with PIF investing $120 million USD in Visionary, including debt replacement for the BOC (Canada) debt for the Moatfield properties.