Creditors give go-ahead for O&Y restructuring

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OLYMPIA & YORK, the troubled property developer, will begin an orderly liquidation next Monday, following the approval of a multi-billion-dollar restructuring proposal by unsecured creditors.

O&Y's Canadian parent, which owed more than dollars 6.7bn ( pounds 4.5bn) when it sought court protection from its creditors' claims last May, is expected to emerge from the five-year process as a small company that manages its former properties. But the plan does give O&Y a chance to restore some value to what will remain of its dollars 20bn property empire.

The plan allows secured lenders to seize the Canadian properties that guaranteed their loans at any time, but most are expected to leave the towers under O&Y's control, at least for the time being. It should also permit O&Y to complete negotiations with lenders to its US division, which has also been unable to meet interest payments on its debts.

O&Y's other main holding, the Canary Wharf complex in London Docklands, fell into the hands of administrators last May after costing the company dollars 6bn.

O&Y's principal shareholders, the Reichmann family of Toronto, tried unsuccessfully to keep control of the company through the long months of negotiations, finally acceding to the competing demands of its various creditors and offering its most subordinated lenders a 90 per cent share of whatever remains of its assets.

Lenders to three large O&Y complexes have so far given notice that they will take title to their property. But most others, banking on a recovery in the commercial property market, have decided to leave their security with O&Y and will either be repaid in full by 1998 or receive a pro rata share of the company.

O&Y also has until 1998 to repay loans and interest due to its unsecured creditors, which include Canada's leading banks as well as international lenders like Citicorp, Hongkong & Shanghai Banking Corporation and Credit Lyonnais.

Even before the seizure of collateral, O&Y's debts outstripped its assets by an estimated dollars 5bn. Without a spectacular recovery in North American office rental rates, they will probably be left with a controlling stake in a fairly small building management firm.