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 — with an interest rate of 25 per cent per year — 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 a 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,” said Frydman.
“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.
Frydman did not explain why the document was signed on Christmas Day.
“I think it’s an unusual document, and it’s a special lending situation,” said Ken Froese, a Toronto-based forensic accountant who did not work on the file but looked at the debenture document for CBC News.
Lending is based on risk — and the higher the risk, the higher the lending rate, said Frose, who owns an independent financial investigative firm that has done work for courts, tribunals and government agencies in Canada and elsewhere.
“The interest rate is far beyond what you would get from a traditional mortgage. And so that would suggest that there’s increased risk,” he said.
It could suggest financial difficulties or expected financial difficulties in the future, Frose said.
“If you look with hindsight and you say: ’25 per cent interest rate, Dec. 25 loan document, a loan arrangement for operating entities in Canada, in the U.S. for the Nygard group,’ it could have been to try to raise funding, knowing you’re getting a financial firestorm coming up.”
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 about $500,000 more in interest and legal fees. That money has not yet been paid, according to the court documents.
The case is scheduled for Tuesday in a Manitoba court.
Nygard spokesperson Frydman didn’t respond to a request for comment on the Sitrick motion.
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