Bear Mountain Developer under creditor protection

Saturday, March 27th, 2010

Master Partnership owes lenders more than $300 million, court documents show

Andrew A. Duffy

Bear Mountain Master Partnership owes its biggest lender, HSBC Bank Canada, $250 million. The funds helped finance this 500-hectare development near Victoria, which has run into serious financial trouble, creditors say. Photograph by: Darren Stone, Canwest News Service, Canwest News Service

The Bear Mountain Master Partnership, placed under creditor protection on Thursday, was in default on some of its loans and owed lenders more than $300 million, according to documents filed in B.C. Supreme Court.

At the request of its largest lender, HSBC Bank Canada, which is owed $250 million, the partnership was placed under the provisions of the Companies’ Creditors Arrangement Act and developer Len Barrie was removed as the company’s CEO.

HSBC claims Bear Mountain, near Victoria, has been defaulting on payments since 2008, and the bank no longer has confidence the partnership can make good on its outstanding debts.

But that is just one of the issues facing the 500-hectare development as other lenders, who are trying to remove themselves from the CCAA process, have painted a picture of a development in serious financial trouble.

In an affidavit, CareVest Capital CEO Richard DeGroat noted his company had loaned Bear Mountain more than $41 million — secured by a first mortgage on 74 lots within the development.

DeGroat, suggesting to the court that CareVest should not be affected by the CCAA proceeding, said he had been in discussions with Bear Mountain about CareVest taking back the lots to satisfy its claims. He said Bear Mountain’s willingness to discuss this suggested to him that the lots are not “an integral part of operations of the hotel and the golf courses.” He was also hoping the process would do nothing to interfere with a number of impending sales.

In an affidavit, Wesley Roitman, managing partner of Romspen Investment Corp., said his company loaned Bear Mountain $16 million, half of which was to be used to build an office building, with the rest used as operating funds, including $5 million to pay debts owed to HSBC. Roitman said the loan is in default, and Romspen has not received any payments since April 2009.

He said the company was about to commence proceedings to recoup its losses six months ago, but was persuaded by Barrie and other Bear Mountain representatives that a refinancing or sale of the development was imminent and the project would again move forward. Roitman said they held off until about a month ago, “as we are of the view that no refinancing is forthcoming.”

Romspen’s $16-million loan is secured by first mortgages on the incomplete office building, two commercial condominium units, Jack’s Place restaurant and the Bear Mountain fitness club. In his affidavit, Roitman said the only way the company can recoup its loss is to take title on those secured assets, finish the office building and lease out the commercial space. And while the development undergoes court-ordered protection as it seeks to restructure its financing, there’s not much good financial news expected in the coming month, according to cash-flow projections provided by Bear Mountain. The Bear Mountain partnership expects to take in $730,000 between March 26 and April 16, but will spend more than $2.3 million.

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