As a former chief executive of a number of London boroughs and the boss of government housing agency Homes England, Avison Young’s Nick Walkley is no stranger to uncomfortable moments.
When news broke this week that the Toronto-based consultancy was in selective default on a $325m (£256m) senior term loan, Walkley almost breathed a sigh of relief.
“This was the biggest and most significant part of the jigsaw puzzle,” Walkley told EG. “Now we can focus on growing the business and getting on with the job.”
That jigsaw puzzle piece is the end of a year-long negotiation with Avison Young’s stakeholders to restructure its finances, reducing its debt by half and bringing debt and interest rates in line with profitability and cash flow. Final votes on the plan are expected within the next few days.
“The real challenge has been ensuring that colleagues retain a majority stake in the business,” said Walkley.
Private ownership
While he was unable to share exactly what that majority stake would be, Walkley confirmed that there would be “no significant dilution” to the current circa 70% ownership by the firm’s principals and that Avison Young would remain in private ownership.
Avison Young’s major shareholder is Canadian pension fund Caisse de dépôt et placement du Québec, which in July 2018 made a $250m preferred equity investment into the business.
With voting yet to have taken place and the restructuring plan not officially signed off, Walkley was unable to share too many of the commercial details around its new financial structure. However, he confirmed that existing shareholders would remain in the funding mix for the business and that the new debt structure would see its current maturity date of January 2026 extended.
Avison Young’s default and downgrading by rating agency S&P was entirely anticipated by the company, explained Walkley, adding that AY had an agreed forbearance with its lenders to skip the two payments that technically rendered the company in default.
Announcing the downgrade, S&P said: “The downgrade follows our recent receipt of information regarding Avison Young’s nonpayment of the required quarterly principal and interest payments on its senior secured term loan. The company failed to make third- and fourth-quarter 2023 principal and interest payments on its senior secured term loan.”
The note added: “We expect to review our issuer credit rating on Avison Young in the coming weeks when we receive additional information about its intentions to meet these and other financial obligations.”
“The re-rating is the final step of the recapitalisation of the business,” said Walkley. “Our expectation is that it will go up very quickly.”
In a formal statement the firm said: “Avison Young has finalised a milestone transaction with its financial partners to significantly strengthen its balance sheet and infuse new capital to invest in its client solutions, team and global operations.
“This transaction is an exciting step forward for Avison Young and will allow the company to better serve its clients and partners well into the future. With an improved financial foundation, Avison Young is well equipped to grow and continue providing innovative solutions as the commercial real estate market recovers in the coming years.”
Return to growth
Walkley remains optimistic about the UK business.
“We have bucked the trend,” he said, adding that he expected to be able to announce a 15-18% increase in profits for the full year.
“The tough decisions we made are starting to bear fruit,” he said, “and we can get back to growing the business and making some key hires.”
Those tough decisions have included a redundancy programme, launched in November 2022 in a bid to cut some C$25m (£14.6m) of costs, and a number of the “old guard” leaving the business.
Walkley, who joined AY in September 2021 from Homes England, has been on a mission to restructure the business since taking over as UK boss from Jason Sibthorpe in June 2022, bringing in new people and refocusing the business on four core ambitions – to be the UK’s preferred adviser; be the people for place; have confidence about capabilities and capacity; and grow its capital markets offering.
And, with a restructuring of the business now almost complete, Walkley said that after perhaps a small rest, he’s ready to push AY to its next phase of growth.
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