Despite opposition from Capilano University and its business partner, among others, the courts have sided with Quest University鈥檚 decision to strike a deal with Primacorp Ventures Inc.
On Nov. 16, Justice Shelley Fitzpatrick of the BC Supreme Court granted permission for the school to go ahead with an agreement with Primacorp Ventures Inc. that would address much of the university鈥檚 financial challenges.
Under this deal, the school will pay off its debts by selling off its campus and lands to the company, which will lease it back to the university.
A report from PricewaterhouseCoopers, the court-appointed monitor, shows there are a total of $30.72 million in secured claims against the Quest.
The highest debt is $25.3 million to the Vanchorverve Foundation, which is managed by Blake Bromley, a founding member of the university.
There is also $2 million in unsecured debts that include claims from students, employees and vendors, among others.
When the Vanchorverve debt was called in last year, it prompted Quest to seek protection under the Companies鈥� Creditors Arrangement Act, or CCAA this past January.
Since then, the school has been seeking a way to pay off its tab. It was recently announced that it would be striking up a deal with Primacorp Ventures Inc.
The sale price has not been made public, but under the conditions, Primacorp will buy Quest鈥檚 campus and lands while paying off the money owed to its secured creditors. It will also pay off a portion of the money owed to its unsecured creditors.
Quest will then lease back its facilities for 25 years.
The deal also sees Primacorp loan Quest $20 million over three years. The company will also provide marketing services to the school, for which Primacorp will be paid.
A new board of governors for the school is to be nominated, with Primacorp having the ability to appoint the majority of the board.
Quest has reported the equivalent of 193 full-time student enrolments for fall 2020.
Prior to Fitzpatrick鈥檚 decision, there were arguments that were brought up in court from those who had issues with the sale.
First, Capilano University, working with developer Landrex Ventures, said it was seeking to put a competing offer on the table.
Katie Mak, the lawyer for Capilano, said that according to the terms of a $2.2-million loan that it previously gave Quest, Capilano has the right of first refusal to strike a deal with Quest.
Mak also added that Capilano was never contacted about the Primacorp deal and was not given an opportunity to match it.
Capilano, which previously operated a campus in 撸奶社区for many years and owns land in the district, would be willing to match the Primacorp offer if the details were made public, she said.
鈥淐apU, if it had the full transaction information from the Primacorp deal...could structure the same deal with a partner or a backer like Landrex,鈥� said Mak.
鈥淚t鈥檚 simply unable to consider at this time whether or not they can even do that without fully knowing what the transaction terms are.鈥�
However, Quest鈥檚 lawyer said that there are no guarantees that Capilano would be willing to close this hypothetical deal.
There are no entries in the official record, such as affidavits, that show Capilano intends to follow through on a deal, John Sandrelli said.
鈥淥ur perspective has been they鈥檝e been waiting for Quest to fail so that ultimately they can do what they want to do,鈥� said Sandrelli.
鈥淭hat鈥檚 what CapU wants 鈥� they want CapU in Squamish,鈥� he said, but noted there is no direct evidence of this intent.
Capilano鈥檚 counsel objected to Sandrelli鈥檚 characterization.
Sandrelli also argued that Capilano, while it wasn鈥檛 contacted by Quest on the matter, was well aware of its right of first refusal. It was notified of the CCAA proceedings and could have exercised that right.
He also added that while some details about the Primacorp deal are private, there was enough public information available about it for Capilano to make a bid.
Sandrelli also added that there鈥檚 no way of knowing whether Capilano will be willing or able to close the deal before the CCAA protection expires on Dec. 24.
He said that Quest鈥檚 current lender, RCM Capital Management, has indicated that it is not willing to lend more money past that date.
Sandrelli also added that Capilano has not been able to get approval from the Ministry of Advanced Education for this sale in the past, and this could be a stumbling block for a possible future transaction.
The other issue raised revolved around Southern Star Developments, which is owned by 撸奶社区developer Michael Hutchison.
Southern Star constructed and owns several student buildings on Quest鈥檚 land.
The company owns the buildings, but Quest owns the land. Under an agreement between the corporation and the school, it will give the buildings to the school after a certain period of time.
In the meantime, Quest is leasing the buildings from Southern Star, which is collecting rent of about $240,000 a month for the student residences.
Quest was seeking to disclaim 鈥� essentially, cancel 鈥� those leases, a stipulation that Southern Star fought against.
The Primacorp deal requires that either the leases are disclaimed or a satisfactory deal is reached with Southern Star.
Sandrelli said that the residences were almost entirely empty due to COVID-19.
鈥淭here鈥檚 no certainty as to when the pandemic will be in a place that would allow the residences to be used,鈥� he said.
However, Southern Star argued in an application that the residences will still be critical to Quest鈥檚 operations. It said that the disclaimers were 鈥渄esigned to extract concessions from Southern Star in future negotiations with the purchaser or Quest.鈥�
The company鈥檚 application stated that this is not the purpose behind disclaimers under the CCAA.
In a report, the monitor agreed with Southern Star鈥檚 assessment, but also said the Primacorp transaction should not be put at risk due to Southern Star.
Southern Star, the PwC report said, can mitigate its losses by negotiating a usage agreement for the residences with Primacorp, but Quest鈥檚 stakeholders have no means to mitigate their losses if the deal doesn鈥檛 close.
The court dismissed Southern Star鈥檚 application to challenge the disclaimers.
