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Homburg Invest files for protection under Creditors Arrangement Act

Homburg Invest files for protection under Creditors Arrangement Act

[MONTREAL, QC] — Homburg Invest Inc. has filed for court protection under the Companies' Creditors Arrangement Act. It did so shortly after its largest shareholder transferred his voting rights to two independent trustees.

"The purpose of the application is to allow us to restructure our activities in an orderly fashion in the best long-term interests of the company and all of its stakeholders," said newly appointed Homburg Invest chairman Hartmut Fromm.

Deloitte & Touche is the proposed court-appointed monitor that will oversee the proceedings.

Homburg Invest (TSX:HII.A, TSX:HII.B) said it hopes the appointment will address the primary concerns of the Netherlands Authority for the Financial Markets (AFM) about the company.

In addition to its traditional duties, Homburg has requested that Deloitte be given additional power to communicate directly with AFM regarding any matters concerning the company.

Homburg Invest owns a portfolio of commercial real estate including office, retail, industrial and development properties throughout Europe and the United States, as well as an interest in Homburg Canada Real Estate Investment Trust.

The CCAA filing follows a decision by Richard Homburg on Friday to transfer his voting rights and control of Homburg Invest to two independent trustees in order to protect the interests of bondholders.

The trustees are Stichting Homburg Bonds and Stichting Homburg Capital Securities, two companies based in the Netherlands.

Richard Homburg and Swiss-based Homburg Finance AG, which he indirectly controls, hold more than nine million shares, representing a 72 per cent voting and 46 per cent ownership stake in Homburg Invest.

The voting power of attorney and standstill agreement gives the trustees ``the full power and authority'' to vote the shares on any resolution presented to shareholders as they see fit, both investors said in a news release.

"I have decided to transfer control to the trustees for the benefit and protection of the Homburg (Mortgage) Bond and Homburg Capital Security A holders," Richard Homburg said in a statement.

There are euro410 million ($558.7 million) worth of Homburg bonds and euro25 million ($34 million) of Homburg capital securities outstanding with the public in the Netherlands.

Homburg spokesman Bert Albers said a secondary benefit of the transfer is to address concerns of the Netherlands regulator.

The Netherlands securities regulator had demanded that Homburg Invest appoint two directors or officers who are residents of the Netherlands and the removal of Richard Homburg as a decision-maker in the company.

The AFM also gave Homburg Invest until Sept. 13 to submit reasons why its license should not be revoked as a financial institution in that country.

"It definitely helps with their concerns but the main objective is to basically give the trustees also the power to do what they want to do with the corporation in the best interests of the bondholders," Albers said in an interview from Amsterdam.

The transfer of voting rights is a temporary measure until a permanent agreement is reached.

In late August, tHomburg Canada, the private real estate investment and management company controlled by Richard Homburg, abandoned its offer to buy the rest of Homburg Invest for $3.25 cash per share.

That followed his resignation in March as chairman and CEO of Homburg Invest.

With the transfer of voting rights, Homburg said he plans to focus on the privately owned real estate ventures with Richard Stolle.

Homburg Invest has vowed to fight a $27 million claim for damages from Homburg Canada for the termination of a property and asset management agreement between the two companies. Homburg said it terminated the agreement because of alleged breaches by Homburg Canada.

The Canadian Press