Nygard company signed $50M US loan security on Christmas Day
Peter Nygard also owes $1.6M to crisis-response firm; company wants Manitoba court to make him pay
A Manitoba company owned by fashion mogul Peter Nygard put up four of its properties, including its Winnipeg and Toronto headquarters, as security to borrow millions last Christmas.
In late 2019, Nygard Properties Ltd. arranged a debenture in the amount of $50 million US through a New York-based financial services firm, White Oak Commercial Finance LLC.
The debenture is the security for a loan agreement between various lenders and Nygard companies in both Canada and the U.S., according to the debenture documents.
In an initial statement to CBC News, Ken Frydman, a spokesperson for Nygard International, said the debenture is part of succession planning for Peter Nygard.
"As a responsible owner of a company that just celebrated its 50th anniversary, Mr. Nygard of course has planned a successor program with the objective of enabling his key associates to end up as owners of the company," he said.
"To that end, a new banking arrangement was arranged. The debenture is a normal security component of any financing."
The debenture was signed on Christmas Day — Dec. 25, 2019 — and lists four land titles as security. Three of the properties are in Winnipeg, on Inkster Boulevard, Notre Dame Avenue and Broadway. The fourth is in Toronto on Niagara Street.
In a subsequent email, Frydman explained that "Nygard International was simply replacing a line of credit with a new one" that happened to have been signed on Christmas. "There is no significance to the date," he said.
The existing line of credit had not been used up, Frydman added, and the new loan needed to be in place by Jan. 3.
"This is a normal business practice. There was nothing out of the ordinary with respect to this debenture."
Frydman did not give particulars about the prior loan, but a Manitoba property registry search shows in September 2019, Nygard Properties Ltd. got a $20 million Cdn mortgage and used the same three Winnipeg land titles as collateral.
That mortgage was discharged Jan. 3, 2020.
"Lines of credit are often used by small and large companies for cash flow management. The early part of the year is usually a time when a fashion house is gearing up for the spring and a line of credit may be used," Frydman said.
While the debenture document says the interest rate is 25 per cent, Frydman said that's not the case.
"This was not the interest rate, but rather a placeholder," he said, explaining the rate fluctuates.
"It looks like they're needing a lot more financing than they did in prior years," said Ken Froese, a Toronto-based forensic accountant who owns an independent financial investigative firm that has done work for courts, tribunals and government agencies in Canada and elsewhere.
It's not unusual for companies to increase their loans, Froese says, but the increase from $20 million Cdn in September 2019, to a $50-million US debenture in December 2019 is significant.
"The timing of it and the amount of the increase and the explanation they have given, it's not entirely consistent with the increased amount. Still raises questions for me," said Froese.
"It's pretty reasonable to conclude they wanted an extra cushion to deal with whatever the contingencies might be."
Last month, 10 women filed a class-action lawsuit in New York against Nygard, accusing him of raping them at his seaside mansion in the Bahamas and operating what they described as a "sex trafficking ring."
The alleged rapes took place between 2008 and 2015; some of the alleged victims were as young as 14.
The allegations have not been proven in court and no criminal charges have been laid against Nygard.
Last week, it was announced that Nygard was stepping down from his company and starting to divest his ownership stake. The news came in a statement just hours after FBI investigators raided Nygard's offices in New York.
PR firm seeks court order to recoup money
CBC News has also learned that Nygard owes $1.6 million US to Sitrick and Company, an American public relations firm that has worked with hundreds of clients, including BlackBerry, MGM Studios, Exxon, the Church of Scientology and Harvey Weinstein.
The strategic communications firm is best known for its crisis work cleaning up celebrity scandals and managing reputations.
Mike Sitrick, the firm's founder, chairman and CEO, says his company was hired in the fall of 2014 and resigned in 2017. The firm's work involved the lawsuits between Nygard and his neighbour in the Bahamas, Louis Bacon.
In July 2019, Sitrick filed a notice of application in the Manitoba Court of Queen's Bench, asking a judge to recognize a 2018 arbitral award in favour of his company and to order Nygard to pay it.
Sitrick had taken Nygard to arbitration in California to recoup money the company said it was owed for public relations and consulting advice it provided years earlier.
"The respondent failed to pay for all services performed and costs incurred by the applicant pursuant to the contract," said the court documents.
In October 2018, an arbitrator sided with the PR firm and ordered Nygard to pay nearly $800,000 US, plus interest and legal fees. That money has not yet been paid, according to the court documents.
The case was in Manitoba Court of Queen's Bench in Winnipeg Tuesday.
A lawyer for Sitrick, Brett Steidl, asked the court to set firm deadlines for Nygard to file affidavit evidence because all the deadlines so far had been missed.
The court also set a timeline for both parties to file documents in the case. The next hearing date was not set but will happen after June 19.
Nygard's lawyer, Richard Good, said Nygard would be changing lawyers but didn't say why.
Frydman said he would not discuss any ongoing litigation.
WATCH | Caroline Barghout's report:
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