Walton Westphalia Development Corporation (the “Corporation”) announces that the senior lender (the “Senior Lender”) under its senior loan (the “Senior Loan”) and the mezzanine lender (the “Mezzanine Lender”) under its mezzanine loan (the “Mezzanine Loan”) have granted 30 day grace periods from the maturity of the Senior Loan, which is October 15, 2016, and from the maturity of the Mezzanine Loan, which is October 21, 2016, to allow discussions between the Corporation and the lenders to continue regarding more formal extensions of the maturity dates of their respective loans.
The Corporation’s wholly-owned United States subsidiary (the “US Sub”) and Walton Westphalia Europe, LP, being an affiliate of the Corporation and the other co-owner of the Westphalia property (“WWE”), have borrowed money under the Senior Loan and the Mezzanine Loan. The amount outstanding under the Senior Loan as at September 30, 2016 was US$23,222,225 and under the Mezzanine Loan as at September 30, 2016 was US$11,047,600.
The Corporation has requested the formal extensions of each of the Senior Loan and the Mezzanine Loan for a period of time that will allow sufficient funds to be raised by a third party immigrant investor fund set up under the US federal “EB-5” program to be, as previously announced, borrowed by the Corporation to pay off or significantly pay down those loans.
The Corporation believes that the Senior Lender and the Mezzanine Lender will extend the loans, however there can be no assurances that they will do so or that they will do so on terms that are acceptable to the Corporation.
In the event that the lenders do not grant extensions or grant extensions on terms that are not acceptable to the Corporation or demand repayment of the loans, the Corporation will be required to repay the loans. The Corporation does not currently have sufficient cash resources to do so which will result in the Corporation being in default on the loans. Such default would entitle the lenders to, among other things, enforce their security on, and take possession of, the assets of the Corporation, including the Westphalia property. Any failure by the Corporation to repay the indebtedness under the Senior Loan and/or Mezzanine Loan as referred to above could result in the acceleration of the maturity date of the Corporation’s debentures under the terms thereof and permit Walton International Group (USA), Inc. to demand payment under the USD$4.1 million subordinate loan facility that it has with the Corporation.
Walton Global Investments Ltd. (“WGI”), an affiliate of the Corporation, has guaranteed to the Senior Lender the repayment of up to U.S$19.5 million under the Senior Loan plus the amount of any outstanding letters of credit provided under the Senior Loan. In addition WGI has provided completion guarantees to the Senior Lender and the Mezzanine Lender. In the event that the Corporation defaults under the above loans, the lenders may be entitled to enforce on those guarantees.
The US Sub and WWE have also jointly borrowed US$1 million of subordinated debt from an individual lender. This loan is unsecured, bears interest at 15% per annum (compounded quarterly) and is due on December 31, 2020 provided that the US Sub and WWE may extend this maturity date until no later than December 31, 2022. This debt is subordinated to the Senior Loan and the Mezzanine Loan and ranks equally with the loan provided by WUSA referred to above. The proceeds of this loan are proposed to be used for general corporate purposes.
Additional Information
The Corporation is managed by Walton Asset Management L.P. and the development of the project is managed by Walton Development & Management (USA), Inc., both of which are members of the Walton Group of Companies.
The Walton Group of Companies (“Walton”) is a multinational real estate investment, planning and development group concentrating on the research, acquisition, administration, planning and development of strategically located land in major North American growth corridors.
Walton has been in business for over 35 years and takes a long-term approach to land planning and development. Walton’s industry-leading expertise in real estate investment, land planning and development uniquely positions Walton to responsibly transition land into sustainable communities where people live, work and play.
The Walton Group manages 21 active developments and administers or manages over 108,000 acres of land in North America.
Its communities are comprehensively designed in collaboration with local residents for the benefit of community stakeholders. Its goal is to build communities that will stand the test of time: hometowns for present and future generations.