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To the Lenders in Projects # 1173, 1188, 4001, 1111, 1112, 1140
Nexus - Michael Graye
November 5, 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.
Eron was paying me a good rate of return on my money, why was it closed down ?
In many instances payments to lenders were being financed by money received from new lenders or lenders to other projects. Few of Eron's projects were actually producing a return on investment. Our investigations to date indicate that many lenders will incur substantial losses because of these practices. Clearly this situation could not be allowed to continue.
What is the current status of the project ?
The above noted loans were provided, directly and indirectly to Mr. Michael Graye. From the information we have reviewed to date, it appears that the funds were used to pay various personal liabilities of Mr. Graye, as well as to further his investments in a conglomerate of wine interests in Canada, France, South Africa and Hong Kong.
We have to date been unable to uncover comprehensive, reliable information regarding the status of these projects. We have, however, commenced procedures, in conjunction with legal counsel for Mr. Graye, to obtain and share information with a view to confirming the amounts outstanding and terms of the various loans above. Ultimately, our objective is to obtain such confirmation as well as the regularization of the security supporting the loans.
These procedures are dependant on obtaining a complete accounting for the projects from Eron, which is underway and expected to be complete in about 4 - 6 weeks.
How much was supposed to be raised for the project ?
We have, to date, been unable to find reliable information regarding the amounts raised. It appears from our initial investigations that a significant portion of the funds allocated to this project were originally designated for other projects. The records of Eron currently available disclose an investment of approximately CDN $23 million in the various loans.
The accounting for funds raised and advanced on these projects is currently anticipated to be complete in about 4-6 weeks.
What security was taken on the project?
From the information available to date, it appears the security may comprise the following:
- Mortgage security over a condominium at Whister B. C., (2nd, 4th, 5th charges)
- Mortgage security over Mr. Graye's Vancouver residence, (3rd, 4th charges)
- Assignment of a second mortgage on a Hawaii condominium
- Assignment of various debts due to Mr. Graye from French wine interests purportedly owned/controlled by Mr. Graye.
- A pledge of shares in a French, publicly traded, wine company.
- It will be some time before we can comment on the validity of security provided. We note, however, that the charges over the B. C. Properties are registered as required.
Are there any mortgages or other loans in priority to the project security ?
As noted above, the mortgage security is subordinate to other charges. We are unable at this time to comment on whether the other security is subject to prior claims.
What is the value of the security ?
We have commissioned a valuation report of the real property security, 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.
We are continuing with our investigation as to the nature, extent and validity of the other security obtained and will report further as information becomes available to us.
Are there any other security or guarantees which might increase recovery on the project ?
The value of this collateral is not yet known, we anticipate gathering this information by the end of December, 1997.
Will I get my money back ?
It is too early to tell definitively how much of your money will be recovered. However, at this early stage it appears unlikely that full recovery will be realized.
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.
Yours truly
Price Waterhouse Limited
Judicial Trustee
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