Real estate services firm Avison Young (Canada) Inc. said it’s close to a restructuring that will clean up its balance sheet after it defaulted on a senior term loan, causing a ratings downgrade.

Toronto-based Avison Canada missed principal and interest payments in the third and fourth quarters of 2023, S&P Global Ratings said in a statement Friday, downgrading the firm to “SD” for selective default. S&P’s action was expected, company spokeswoman Andrea Zviedris said by email.

“We are going to just eliminate significantly more than 50 per cent of all of our obligations,” Chief Executive Officer Mark Rose said in an interview with Bloomberg on Saturday, adding that Avison’s board will also shed non-independent directors.

The company was preparing to announce the restructure as soon as Monday and updated the ratings agencies on its plans. At that point, S&P said it was then obliged to inform the market immediately, though it didn’t provide a full picture of the company’s position, Rose said.

Representatives for S&P didn’t immediately respond to a request for comment.

The default is “purely technical,” based on a non-repayment which the company had agreed with lenders as part of the imminent revamp, Rose said. All of the company’s investors and creditors have agreed on a plan which involves new money from existing backers, Rose said. 

The firm’s almost 700 partners will continue to own a majority of the firm, with Caisse de Depot et Placement du Quebec continuing as an investor, and a very small amount of debt converted to equity. Rose anticipates a positive re-rating shortly after agencies review the new structure, which could be finalized and made public within the next two weeks.

Avison is a competitor to firms such as CBRE Group Inc. in handling real estate sales, property management, leasing and other services in the commercial real estate sector. Business has been slow as the commercial property market endures one of its worst downturns in a generation. 

In September, S&P lowered its rating on Avison Canada to CCC with a negative outlook, saying the company needed additional sources of cash. Avison had about $23 million in net cash outflows from operating activities — excluding cash interest payments — in the first half of last year, partly because of lower capital markets and leasing revenue, S&P said at the time.