Toronto’s Iconic El Mocambo Placed Under Court-Appointed Monitor Amid Financial Struggles

Toronto’s El Mocambo to Operate Under Financial Oversight Amid Debt Default

Toronto’s historic El Mocambo music club has been placed under the supervision of a financial monitor after its owner, former Dragons’ Den star Michael Wekerle, defaulted on approximately $55.6 million in debt through companies under his control.

During a hearing before Ontario’s Superior Court of Justice on Thursday, legal representatives for both Mr. Wekerle and financial lender Waygar Capital Inc. agreed to allow Fuller Landau LLP, a corporate restructuring and insolvency firm, to oversee El Mocambo’s operations. This arrangement aims to assess the business’s viability and determine whether it should continue operating in the event of a receivership.

Financial Troubles and Court Proceedings

Waygar Capital, based in Toronto, initiated court proceedings in January by filing an application for receivership, citing that Mr. Wekerle had not made any payments toward the debt since June 2021. The loans were secured to provide working capital and finance extensive renovations at the club, which was in deteriorating condition when purchased by Mr. Wekerle.

Receivership is a legal process where a third party takes control of an entity’s assets to liquidate them for creditor repayment. On Thursday, Waygar’s lawyers initially requested an order to appoint Fuller Landau as the receiver starting Monday morning, ensuring that scheduled events could proceed over the weekend before halting operations for a sale process.

However, Joseph Bellissimo, legal counsel for Mr. Wekerle from Cassels Brock & Blackwell LLP, contended that the venue has over 60 events booked within the next three months. He argued that an abrupt closure would be detrimental, stating, “This is an operating business that’s a 75-year-old icon of the city. If it shuts down, that will be destructive to value.”

While Waygar’s legal team did not object to a temporary monitoring period, they remained skeptical about the significance of a few additional events in preserving the club’s value. “They keep the lights on to some extent, but the reality is the value in this is far beyond the management of a couple of events during a three-month period of sale,” said Steven Graff, a lawyer with Aird & Berlis LLP.

Judge Peter Osborne suggested implementing a monitoring phase under Fuller Landau’s supervision before determining the next course of action. The duration of this oversight remains uncertain, with discussions ranging from one to two weeks.

Potential for New Ownership

Despite ongoing legal challenges, Mr. Wekerle expressed optimism about the club’s future. In an interview on Thursday, he revealed that he has assembled a new ownership group to take over El Mocambo and has presented this proposal to his lenders. “We are looking to bring the El Mocambo to a new level, with new ownership and management participation,” he stated. Previously, Mr. Wekerle had indicated his intention to reduce his stake in the venue and delegate management to others.

Waygar’s legal team has not yet commented on the viability of the proposed ownership transition.

At an earlier hearing on Tuesday, Alan Merskey, another lawyer representing Mr. Wekerle from Cassels, did not oppose the receivership request but acknowledged a dispute over the exact debt amount. However, he conceded that the owed sum “definitely exceeds the value of the asset in a very significant way.”

El Mocambo’s Legacy and Challenges

El Mocambo has been an integral part of Toronto’s music scene since its opening in 1948. Mr. Wekerle acquired the venue in 2014 for $3.8 million, subsequently investing over $30 million in extensive renovations, including state-of-the-art audio and video equipment for recording live performances.

However, the club’s reopening was significantly delayed, partly due to the COVID-19 pandemic. Mr. Wekerle’s vision involved charging premium ticket prices for an intimate concert experience featuring high-profile artists, but the venue has struggled to consistently attract marquee performers since reopening in 2021.

“Everybody feels a fairly high level of nostalgia towards the asset,” said Mr. Graff during Tuesday’s hearing. “Hopefully, it will have another life post this process, and ideally as a concert venue. But in the meantime, we need to take steps to get Waygar back its money.”

Wekerle’s Broader Financial Woes

In addition to El Mocambo’s financial distress, another of Mr. Wekerle’s business ventures is facing insolvency. In February, the court placed his real estate company, Waterloo Innovation Network, into receivership after Waygar filed a separate application. The company, which owns a property in Waterloo, Ontario, reportedly owes around $32.2 million and had also guaranteed El Mocambo’s debt obligations.

The combined debts of Mr. Wekerle’s business ventures amount to approximately $88 million, borrowed through the Canadian Senior Debt Fund managed by Ninepoint Partners in Toronto, with Waygar serving as a consultant.

Conclusion

El Mocambo remains operational for now under the supervision of Fuller Landau LLP. Whether the iconic venue will continue as a concert space or undergo a sale process remains uncertain. The court’s decision in the coming weeks will determine the fate of this Toronto landmark, as financial struggles and creditor interests shape its future.