Avison Young recapitalizes after default, credit downgrade

Avison Young (AY), a Toronto-based commercial real estates services firm, on Monday announced it had agreed to a comprehensive deleveraging transaction with its current financial partners.

The deal arrives three days after S&P Global Ratings downgraded the firm to “SD” for "selective default," after the credit rating organization learned AY had missed principal and interest payments in Q3 2023 and Q4 2023.

Previously in September, S&P lowered its rating on AY to “CCC” with a negative outlook, saying the firm needed to secure additional sources of cash.

Since the Covid-19 pandemic, the commercial real estate market has faced its worst downturn in a generation – contending with reduced demand for office space and higher interest rates.

Mark Rose, CEO of AY, told Business Insider the firm has been in talks with investors and lenders for 15 months, launching restructuring talks in 2022 after central banks started to increase interest rates. Rose said those conversations reached an agreement to not make payments on the first-term loan, which was highlighted as a default by S&P.

AY has continued to make payments on its revolving loan, Rose said.

The Monday deal involves all of the company’s existing lenders and capital partners, and is expected to close in March. AY in a press release said the deal has reduced its financial obligations by over half and has secured additional capital to advance strategic goals.

Rose told Business Insider that AY partners gave up a small amount of equity as part of the deal, but will continue to retain majority ownership of the company. AY’s board of directors will also be reduced from 11 to five members.

The company expects an improved credit rating reflective of its “stronger financial position” following completion of the transaction.

Rose thinks commercial real estate transaction activity will start recovering in the second half of 2024 and more significantly in 2025. Two-thirds of AY’s business is in commercial real estate transactions.

However, Rose said the firm plans to keep strengthening service lines like data analytics, as well as moving more heavily into tools and services addressing AI implementation in the industry.

AY launched a consulting practice under the leadership of a former Deloitte partner shortly after the onset of the Covid-19 pandemic.