Deadline set for Greycoat

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GREYCOAT inched towards receivership yesterday after the troubled property group was told it had 30 days to rectify breaches of its loan covenants.

The Law Debenture Trust Corporation, which acts as trustee in respect of pounds 50m of zero-coupon Greycoat bonds, has told the heavily indebted group that it must put right gearing covenant breaches by 11 November.

Greycoat has been in breach of its covenants for some time, but benefited from a waiver while a rescue proposal from Postel, the pension fund, was considered. This was voted down on Friday, with a number of the company's preference shareholders and bondholders arguing that Postel's valuation of Greycoat's landmark properties was too low.

Banks that have lent money to Greycoat are in a reasonably secure position, with the value of their loans amply covered by the value of the properties, even in a fire sale.

But according to the disputed Postel valuation, such a distress liquidation of Greycoat's properties would leave the zero-coupon bondholders with only 66p in the pound.

Observers said the move by the Law Debenture Trust was probably designed to put pressure on the company to come to terms with one of the factions putting forward alternative rescue plans.

Greycoat, which owns some of London's best-known developments, confirmed yesterday that it had been approached by a number of groups anxious to discuss a possible financial restructuring of the company. These include a group of investors led by the UK Active Value Fund, which holds 18 per cent of the ordinary shares. This group is understood to include two well-known investors, Brian Myerson and Julian Treger.

The Greycoat camp views the strategy of the bondholders - a relatively small group of about a dozen investors - as risky. 'The company went out of its way to find a solution that worked,' a spokesman said. 'Shareholders rejected that. Now it is up to the dissidents to find a solution.

'The directors are clearly not going to accept anything which is not a delivered deal,' he said. 'In the meantime, the risk for them is that the banks will feel that to protect their position they will have to put in their own receivers.'