The president of Groupe Sélection, Réal Bouclin, is losing patience with the judge who is overseeing the restructuring of the insolvent company. In his most recent decision, Michel Pinsonnault is not kind to the tactics of the businessman, whom he accuses of a lack of “good faith”.
At the same time, the magistrate rejects the challenge of the real estate developer and manager of residences for the elderly (RPA), which allows the controller to auction the interests held by Selection in 25 complexes. The offer from its financial partner Revera – the price of which has not been disclosed – will serve as a “priming bid”.
It is especially the remarks of judge Michel Pinsonnault towards the “directing soul” of the company that attract attention when reading the 40-page judgment rendered last Friday.
“Counsel for the lenders was right to question whether Mr. Bouclin is more concerned with prioritizing his personal interests over his fiduciary duty as a director and officer of Selection and its various companies,” he wrote.
Sélection objected to the mechanism proposed by the monitor by deeming “insufficient” the price offered by Revera. But it is not with a “new legal debate […] at high costs” that we will be able to “stop the financial haemorrhage” within the RPA giant – whose monthly operational loss is at least 7 million –, decides the judge Michel Pinsonnault.
The restructuring of Selection, which turned to the Companies’ Creditors Arrangement Act (CCAA) last November, is costly. More than $12 million will have been gobbled up in “professional fees” by June 24, according to PwC forecasts.
Drawn from the interim financing offered by the Selection bankers, this sum was used in particular to remunerate PwC, the firm responsible for the financial recovery, but also the company’s lawyers. Judge Michel Pinsonnault suggests that the president of Sélection is trying to take advantage of this situation.
By email, the company qualified this remark by Judge Pinsonnault by pointing out that the “fees budgeted by the controller for Selection represent less than 10%” of the total bill of 12 million. She also expressed disappointment that the court gave the go-ahead to sell a wallet “for less than 50% of its value.”
In the portfolio of 25 RPAs, Revera’s ownership percentage stands at 75% for 17 residences. For 7 other complexes, Revera holds 50% interests in addition to owning 85% of another RPA. The rest of the holdings belong to Selection.
The way things are going, the judge says he has difficulty seeing “a manifestation of good faith and collaboration” emanating from Mr. Bouclin and Selection.
Judge Michel Pinsonnault recalls that the 25 RPA held jointly with Revera should not remain in the bosom of Selection at the end of the financial recovery. It is therefore questionable why the businessman was “so vehemently” opposed to the proposal on the table.
“The court would have liked to hear Mr. Bouclin’s explanations on this subject if other considerations existed,” said Judge Michel Pinsonnault, lamenting that his recent calls for collaboration between the businessman and his bankers did not did not have the desired effect.
The cash shortfall was around $32 million last year and is likely to be similar in 2023. Added to this are capital expenditures that will require new cash calls as RPAs are deficit.
Manager of the complexes, Sélection had forecast expenditure of 27 million in 2023. This target was however reduced to 2.9 million since the insolvent company does not have the funds available to carry out the work.
