Banks close to Jubilee Line go-ahead deal

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ERNST & Young, the administrators of Canary Wharf, today will ask the 11 banks that backed the project for another pounds 200m. The sum will include a full commitment to fund the private sector share of the pounds 1.8bn extension of the Jubilee Line to London Docklands.

The extra commitment comes on top of pounds 600m already lent by the banks to Canary Wharf, which went into administration last May.

The package asks for pounds 98m that will be put into the Jubilee Line project, fulfilling the first stage of a commitment made by Canary Wharf's developers, Olympia & York, more than three years ago to contribute pounds 400m.

This would mean that the line could go ahead.

The administrators are also asking for about pounds 50m to pay creditors left stranded by the collapse of Canary Wharf, some of which have started legal actions against the administrators and the project manager, the P&O subsidiary Lehrer McGovern International.

About half of the rest of the money is to fit out offices that tenants, including the advertising agency D'Arcy Masius Benton & Bowles, have contracted to take but have yet to occupy. The rest is for running costs, which are estimated at about pounds 1m a month.

The administrators, Nigel Hamilton, Stephen Adamson and Alan Bloom, flew to Toronto last night for a series of meetings with the 11 banks that are expected to last until the end of this week.

At the meetings they hope to thrash out a solution to the stalemate that has held up the project to extend the Jubilee Line since last April. London Underground, which says it has spent pounds 100m on the project already, has offered to move around 1,500 staff to Canary Wharf if the line is built.

The banks, led by Lloyds and Barclays, have asked for a detailed report on the funding needs of Canary Wharf and the likelihood of a sale of the project, or any of the buildings in it, in the near future. The bankers are expected to approve the extra funding, though in recent months they have been unable to agree among themselves about the details of how money is made available for the project.

The administrators' report is believed to paint a pessimistic picture. Ernst & Young believes that it would be difficult to obtain a decent price for the project in the current property market.

This is despite tax breaks, worth more than pounds 600m, that might be utilised by any purchaser of the project. Potential bidders to have looked at the development include Hanson, the Hong Kong entrepreneur Li Ka-shing, and a US consortium including Paul Reichmann of O&Y.