Canary Wharf rebirth mooted

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ERNST & YOUNG, administrators of Canary Wharf, are to propose a radical scheme to its bankers, who have lent the project pounds 600m, which will allow the stricken development to be freed from administration.

The scheme would mean at least another pounds 100m of write-offs for the banks, led by Barclays and Lloyds, in addition to the pounds 100m of extra funds that they are expected to agree to put into the project in the next few days.

Talks are also at an advanced stage with the European Investment Bank, which has provisionally agreed to put up pounds 98m as a contribution to allow work to start on the pounds 1.8bn project to extend the Jubilee Line to Docklands.

The banks are to be asked to agree to a Companies Voluntary Arrangement, a scheme in which Canary Wharf would be reconstituted as a limited company to be run by Gerald Rothman and Bob Spiers, the only two senior directors of Canary Wharf's developer, Olympia & York, to remain on the payroll.

The new company would continue trading as normal, but there would be a programme of disposals under which the banks, and trade creditors owed about pounds 50m, would be paid in the latter part of this decade. The banks are also expected to be asked to convert at least pounds 100m of their debt into equity in the reconstituted company.

Nigel Hamilton, one of the joint administrators, admitted yesterday that the voluntary arrangement was 'certainly a possible option'. He said the administrators were looking at a number of possible exit routes for the banks, and would put proposals to them in the next few weeks.

None of the proposals will include any attempt to sell Canary Wharf. 'A person buying the project lock, stock and barrel is not an issue today, but somebody will look at it at some point,' Mr Hamilton said.

Lenders to Toronto's First Canadian Place, Olympia & York's flagship development, began foreclosure proceedings yesterday to take control of the complex. Last month they rejected the company's debt restructuring proposals.