Coronavirus impact on HarbourEdge business

Agree with HMIC future, collapse is to be expected; our silver lining could work with a different management.

With our assets in their care we can say good buy to our investment

Sadly enough, at this point I would trade anything for certainly, including 50% of my investment. Low standards

Agree, the global recession is a threat for HMIC survival; unfortunately for HE, not the only one.
 
The biggest challenge that HMIC faces currently is not coming from the non-performing assets but from the unhappy Investors that totally lost confidence in HE and are strongly opposed to HE plan to split their invest in Class A (mortgages) and Class B (real estate construction/development).
As OBCA and Securities Law protect Investors, HE cannot do this type of change without suitability assessment or a Plan of Arrangement that needs the support of more than 66% of the outstanding shares to pass; even in this case the shareholders have the right to dissent and exit the fund.

The unhappy Investors can also initiate Oppression legal actions – the oppression remedy is in place to protect minorities in a company in situations where oppressive conduct violates the reasonable expectations of that minority. This would build on unfairness of the proposed restructuring (which favours the remaining shareholders over those that want to depart). In an oppression action, the court has great latitude to make any order that would cure the oppressive conduct.
The unhappy Investors can also apply to the court for a wind-up of the corporation (on terms to be set by the court, including an orderly payout of proceeds when received).

The outcome of legal action initiated by a group of Investors is a major threat to the HMIC survival.

HE should first and urgently address the threat to its survival that is "unhappy Investors" and not the non-performing assets. It is obvious that the split that could save their company is not between performing and non-performing assets but rather between Investors that want to exit the fund and Investors that want to remain.

This is exactly what Two MIC proposal addresses.

I am a very unhappy HE investor myself, a badge of honor these days

My two cents is that for HE an exit option similar to ELO could be easier to implement (they already did it). The result is the same, we split the assets, both performing and non-performing

I am okay to take a cut as a price for getting out from this insanity 


 

Well said, disgustedbeyond , I am with you on this one.
As it levels the field, the orderly wind-up, executed in-house by HE (no receiver or fire sale), is the only truly fair and equal solution for ALL Investors: distribute pro-rata HMIC assets (performing and non-performing) to the current shareholders.  

In fact, due to the nature of the market, we do not know at this point what will be the capital loss. HE tries to sell us the idea of "HRAC assets remediation". That is done by sinking more cash into the construction sites that had been abandoned for a reason and then increasing the asset valuation on paper.

When the assets are sold, we are not going to get the value from paper, but what the MARKET pays for those assets and this is indeed the only way to be fair with ALL Investors. 

My lawyer tells me that, if fraud or misrepresentation can be proved, "there may be an action for damages against HE Director(s) when this is all over". 

Directors are accountable in Canada and punished for lesser missteps than misrepresentation that is business like usual for HE Directors

In his letter pushed to Investors by HE management on January 21, 2020, Blake Wallace confirmed that the best assets have been sold to pay the ELO: "Remember, the  best assets have already been sold for the early leavers."

Besides this information from an authorized source, I also have data that I gathered in a spreadsheet, based on both financial statements and the emails that updated us on the ELO progress. 

1. Data provided by the audited Financial Statements  


2. Was the ELO paid from performing (cash from mortgage maturities) or non-performing (real estate) assets ?

According to "June 30-2016 MDA", half of the $60 redemption amount has been paid within one year from the ELO launch from performing assets (mortgage maturities): "We have now redeemed 30 million shares tendered under the ELO with 30.3 million shares remaining to be redeemed."

Based on the ELO updates sent via email, 25% of the redemption amount have been paid out by selling real estate assets:
June 5, 2017             $1,175,000
July 4, 2017              $6,000,000
February 15, 2018     $2,000,000
January 1, 2019        $5,825,000

I cannot reconcile how $15,000,000 (25%) have been paid out: cash from mortgage maturities or real estate selling proceeds?

3. Last but not least, the ELO shareholders continued to receive dividends on the remaining part of shares, unless HE had a special understanding with them, which is not likely as ELO group had an excellent negotiator.
Between 2016 and 2018, the ELO shareholders received an estimated of $3 million in dividends (5% of their redeemed investment); if the shareholder was a Westcourt investor that requested to redeem their investment in September 2015, they received 10% in dividends between 2015 and 2018 which translates in only 5% discount and not 15% as advertised.
Well done, Westcourt!