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To the Lenders in Project # 1118
Borrower - Lee Balak
November 6, 1997
As indicated in our letter to lenders dated October 22, 1997 we will be providing information to lenders through regular project updates. Unfortunately, due to the poor quality of Eron's accounting and lender records we are presently unable to answer all the questions you may have. However, based on our initial findings we can address the frequently asked questions set out below. We stress that the information available to us is subject to verification and accordingly our findings are subject to change as more information becomes available.
What is the current status of the project ?
The loan matured on July 15, 1997, but remains outstanding. Reportedly, the borrower was attempting to refinance, although there is no evidence of any success. We have instructed our lawyers to demand payment and to commence foreclosure if payment is not received. Our lawyers advise us the first mortgage is in arrears and a foreclosure action is by the first mortgagee.
How much was supposed to be raised for the project ?
$405,000
According to Eron's records how much was actually raised for the project ?
Approximately $405,000.
According to Eron's records how much was advanced to the project ?
Approximately $405,000.
What security was taken on the project ?
A 2nd mortgage in the amount of $ 405,000.
Are there any mortgages or other loans in priority to the project security ?
The following mortgage has priority:
-A 1st mortgage held by Amordeus Management Consultants Ltd in the amount of $450,000
What is the value of the project ?
An appraisal, completed earlier this year at the request of Eron reflects a value of $865,000. We have commissioned an update to this report, which is to be received by the end of November, we prefer not to speculate on the value, rather we will advise you of the result of this report.
Are there any other security or guarantees which might increase recovery on the project ?
No, the underlying property would appear to be the only source of recovery.
Will I get my money back ?
Based on the above noted appraisal, the property is 100% financed. It seems, however that a good portion of the second mortgage should be recovered from an eventual sale of the property.
When will I get any money back ?
It is likely to be many months before any money is available to lenders.
We caution you that the information available to us is still incomplete and limited in scope. Nothing in the foregoing should be construed as guaranteeing any return of funds. We will keep you informed on a regular basis and will issue a further project update on or about November 30.
In the meantime if you have any further questions or information concerning the project please contact us in writing at the above noted address or by fax at (604) 688-6128, clearly marking your correspondence as relative to the "Lee Balak Project".
Yours truly
Price Waterhouse Limited
Judicial Trustee
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