The company saw its stock value fall on the TSX Venture Exchange by 50% on June 9 reaching a 52-week low of seven cents. Since April, the stock has lost 80% of its value.

“None of our members has had their operations affected and certainly no students have been affected as far as we know”

The company owns 11 brands of ESL schools, community colleges and career colleges on 25 campuses in Toronto, Vancover, Halifax and Victoria. Languages Canada has said that no students have been affected as far as it knows, and it is monitoring the situation.

In a bid to find a last minute solution, the company said it is working with a senior lender to negotiate a forbearance agreement.

“Management expects the senior lender may be willing to provide the company with additional time during a forbearance period if new liquidity in the range of $2m to $3m is injected into the company prior to the end of June 30, 2015,” it said in a statement.

It went on to say that “the management believes that a number of the company’s directors, officers, management, employees and several outside parties are prepared to contribute $2-4m of new liquidity to the company in conjunction with execution of the forbearance agreement”.

The company recently acquired two of the biggest agencies in Korea – adding uhak.com to its portfolio late last year and four offices operated by Kim Okran International Studies Centre in January.

In addition to the drop in share price, the company reported a 43% decline in adjusted EBITDA, from $3.7m in 2013 to $2.1m last year.

Revenue for the first quarter of this year has also fallen to $12.4m, compared with $15.7m in the same period last year.

Loyalist Group also announced last week the resignation of four senior staff members

Four Loyalist schools are members of ELT representative body, Languages Canada. Executive director, Gonzalo Peralta, said the association is monitoring the situation closely and has been in touch with the schools.

“To date that has been the only action required since none of our members has had their operations affected and certainly no students have been affected as far as we know,” he told The PIE News.

Loyalist Group also announced last week the resignation of four senior staff members: CEO Andrew Ryu, CFO Doug Chornoboy–who has reportedly stepped down to address personal matters–, and company directors Doug Conick and Paul De Luca.

Former COO Shawn Klerer has been promoted to replace Ryu and Frank Salvati, a financial executive, has been brought in to replace Chornoboy.

Peralta said that while the financial situation is challenging, “it is a good sign to see changes at the board and senior management in response to the gravity of the situation”.

He added: “What we hope for most is that, supported by the change in management, the Loyalist Group is able to regain its financial composure and the trust of its lenders and shareholders.”

He underlined that in the event of any school closures, “Languages Canada will take the appropriate steps to protect and support students.”

Just yesterday, the group announced it is proposing non-brokered private placement to its stakeholders both inside and outside the company to help with operational costs during this forbearance period.

To raise between $2.5m and $8m, the company will be issuing up to 800,000 units at a price of $10 each.

“The company raised $10m in March and told investors that was for an acquisition. That ended up not being true”

“We believe a fair and transparent approach is the best path to put Loyalist back on sound footing and rebuild confidence with all parties,” said newly-appointed CEO Shawn Klerer.

A number of investors have spoken publicly about the company’s first quarter, shedding light on the market’s faith in the organisation.

Canadian finance commentator Fabrice Taylor, creator of the President’s Club, a Canadian investment newsletter, said that the company misled investors a few months ago.

“The CEO, who was removed, told investors and me that business was good,” he told the Business News Network in a statement.

“The company raised $10m in March and told investors that was for an acquisition. That ended up not being true.”

He said the money was instead used for “operational costs”.

This was echoed by Stephen Takocsy, chief investment officer at Lester Asset Management on BNN last week, who said the firm sold its shares.

“A lot of money was going out towards marketing and advertising for language schools and the CEO could not explain to us what this money was being spent on, so we got really nervous not getting the answers we wanted to and we sold the stock,” he said.

“I honestly don’t have faith in the board or management or the business.”

When contacted by The PIE News, Loyalist Group confirmed the “senior lender” it is relying on is the Bank of Montreal, but did not provide any further comment.

In addition to uhak.com and four offices operated by the Kim Okran International Studies Centre, Loyalist Group owns King George International Business College, Upper Career College of Business and Technology, MTI Community College, Victoria International Academy Training Centre, King George International College, Study English in Canada, PGIC, Cornerstone, and Urban International High School.