Threat of receivership looms as Islander RV called to court over $5.9M debt

Wells Fargo is seeking a court order to force Islander RV into receivership, citing several defaults on an $8-million credit limit.

Wells Fargo seeking order to place company in receivership

Ryan Cooke · CBC News · Posted: Jul 31, 2018 1:33 PM EDT | Last Updated: July 31, 2018

Islander RV, located along the Trans Canada Highway on the outskirts of St. John's, is facing a court challenge by one of its creditors. (Google Maps)

Islander RV is fighting to keep control of its business as the company's largest lender has filed a court challenge to force it into receivership.

Wells Fargo says the company, which operates near Paddy's Pond on the outskirts of St. John's, has defaulted on its payments several times and owes $5.9 million on its $8-million credit limit.

The financial institution believes Islander RV is insolvent, and is taking steps to protect its investment in the company before other creditors come knocking.

After a brief appearance in Supreme Court in St. John's on Tuesday, the lawyer for Islander RV didn't show grave concern.

"It's just a matter of moving around some debt," said Robert Andrews , who works with the St. John's firm McInnes Cooper.

[There are] continued liquidity concerns and heightened credit risk for Wells Fargo.- Wells Fargo court documents

Islander RV is owned by Pat Squires, who also owns Eastbound International Speedway in Avondale and the Brookside Golf Resort in Hatchet Cove.

CBC News has left messages for Squires, but has not yet heard back.

When asked if he could say whether or not the other businesses would be affected by the Wells Fargo application, Andrews said he represents only Islander RV.

RVs selling, lender not getting paid

Wells Fargo and Islander RV have an agreement wherein the financial institution pays for the inventory, and the company is supposed to pay them back immediately after a sale.

However, after an audit started last summer, it was found Islander RV was delaying those payments by an average of two weeks.

Before the audit began, Wells Fargo says it noticed large amounts of money were being moved out of Islander RV and into a numbered company, 11143 Newfoundland Ltd., owned by Pat Squires.

Public records show the company is used for commercial real estate deals.

Trouble monetizing real estate

After the audit, an agreement was reached that Islander RV and the numbered company would sell off or rent some of its real estate.

Those attempts were unsuccessful, "leading to continued liquidity concerns and heightened credit risk for Wells Fargo," the application says.

A real-estate listing at Realtor.ca shows Islander RV's four-acre location in Grand Falls-Windsor is up for sale, for $3.39 million.

"Current owner looking to relocate within community and build new facility," reads the listing, which touts a three-storey building with multiple office, loft space, warehouse and service bays.

Eastbound Speedway in Avondale has the same owner as Islander RV. (Katie Breen/CBC)

In April, a second audit found the time it took Islander RV to pay off its sold units had doubled to 28 days. Court documents say it was also discovered the company owed more than $250,000 to the Canada Revenue Agency.

Wells Fargo allows Islander RV to rent some of the recreational vehicles, while others must be sold.

Wells Fargo alleged the company had been renting vehicles without its consent, and that more than $384,000 was owed for units that had been sold.

According to the court documents, that amount now exceeds $550,000.