This securities class action relates to Guestlogix Inc. publishing core documents (including MD&As and annual and interim financial statements), and making other statements containing material misrepresentations regarding various financial covenants attached to two different credit facilities.
Guestlogix entered into two separate credit facilities on December 23, 2013 and June 5, 2015. At no time did the Company ever disclose that there were financial covenants contained within these two credit facilities pertaining to trailing EBITDA or what the consequences were for breaching these covenants.
On November 12, 2015, Guestlogix announced that it was in default of two separate covenants pertaining to the two credit facilities. As a result of the breach, both credit facilities could become due on demand by the lender, the long-term subordinated term credit facility became reclassified to current, and the interest rate on the principal amount of that credit facility rose from 12% to 18%. Guestlogix remains in default of both credit facilities and has been negotiating forbearance agreements with the lenders since December 2015.
Furthermore, on December 16, 2015, Guestlogix announced that an internal review of its prior accounting practices and revenue recognition policies concluded that it may be required to restate its prior financial statements and that the preliminary review indicated that the restatement would be material.
This action was initially advanced on behalf of a class of Guestlogix shareholders advancing statutory claims pursuant to Part XXIII.1 of the Securities Act (proposed “Class A”), as well as a class of Guestlogix shareholders advancing claims for negligent misrepresentation at common law (proposed “Class B”).
On March 25, 2019, on consent of the Defendants, the Honourable Justice Paul M. Perell of the Ontario Superior Court of Justice granted the Plaintiffs leave to amend the statement of claim to discontinue the common law claims advanced by proposed Class B, and ordered that the Plaintiff representing proposed Class B be removed as a named Plaintiff in this Action, leaving only the Plaintiff representing proposed Class A as the sole named Plaintiff in this action. A copy of the order can be found here.
Claim or Motion for Authorization issued: January 25, 2016
Class Period: June 8, 2015 to and including November 12, 2015
Individual Investors Period: Shares purchased prior to June 8, 2015
Motion Record in Support for Statutory Claim Served: August 28, 2017
Shareholders’ Class Counsel: Jacqueline Horvat and Samantha Schreiber, Spark LLP
Shareholders’ Indvidual Investor Counsel: Andrew Morganti and Hadi Davarinia, Morganti & Co., P.C.
Defendant Guestlogix’s Counsel: Kevin O’Brien, Osler Hoskin & Harcourt LLP
Defendant Brett Proud’s Counsel: Andrea Gonsalves and Carlo Di Carlo, Stockwoods LLP
Defendant Patrick Leung’s Counsel: Ellen J. Bessner and Khrystina McMillan, Babin Bessner Spry LLP
Further Court Hearing Date(s): TBA