Olympia & York Gets Breathing Room, But Banks Keep Tight Rein
LONDON (AP) _ Olympia & York’s Canary Wharf project averted collapse Friday when the company persuaded lenders to provide an extra $38 million to keep the development going while an overall debt restructuring is negotiated.
Olympia & York said the company and its bankers would continue discussing the debt restructuring plan presented Thursday by the world’s leading commercial landlord.
Lenders were responding warmly to the proposal, said a banking source who spoke on condition of anonymity. However, the plan was considered only the basis for negotiation, the source said, and the banks were keeping a tight rein on the cash-strapped company.
The extra financing, which Olympia & York said would cover ″the coming weeks,″ was agreed at the last minute, took days to negotiate and was short of the developer’s requests.
If the money hadn’t come through, the project had been expected to end up under British bankruptcy court protection from creditors.
″Naturally we are delighted at this demonstration of support for Canary Wharf,″ Gerald Greenwald, Olympia & York’s president, said in a statement.
″Not only does it enable us to continue the work required prior to the arrival of the next tenants but it allows all parties to look beyond the short-term and plan for the medium to longer-term future,″ he said.
In its plan, the Toronto-based developer offered lenders up to 20 percent of non-voting stock in the privately held parent company, Olympia & York Developments Ltd., and 30 percent of non-voting stock in Canary Wharf.
In exchange, Olympia & York is asking for a five-year extension of its approximately $12 billion debt, suspension of interest payments on a third of that debt and an extra $540 million in financing to finish Canary Wharf.
Olympia & York later disclosed in a filing with the U.S. Securities and Exchange Commission in Washington, that it had placed nearly 55 million shares of its forest products unit’s Abitibi-Price Inc. holdings and 114 million shares of Gulf Canada Resources Ltd. held by an energy affiliate into bank custody in Canada.
Those shares already serve as collateral for $2.5 billion in loans to Olympia & York. The company said it put them into bank custody ″to provide comfort to the lenders.″
It further pledged not to sell or transfer the shares without giving five business days’ notice. But the company said the action shouldn’t be interpreted as an intent to sell the shares or an indication that lenders might seize them.
Lenders last week were arguing about whether to give Canary Wharf an extra $54 million to keep the project going for a month.
Olympia & York previously had wanted an additional $198 million to cover three months.
Canary Wharf, a commercial complex on the outskirts of London, is the company’s biggest project. It has encountered trouble attracting tenants because of recession and its inconvenient east docklands location.
The developer is suffering a severe cash crunch following a decline in the value of its real estate and other holdings, and has been negotiating for weeks with numerous banks over the debt burden amassed over the years.