Greycoat may make pounds 120m cash call

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The Independent Online
GREYCOAT, the struggling property group, is in talks with Postel Investment Management about a deal that could result in a rights issue to raise pounds 120m, writes Heather Connon.

Details of the restructuring are likely to be announced today, and neither Greycoat nor Postel would make any comment.

There was speculation in the City that Postel - which manages the pension funds of BT and the Post Office - would underwrite a rights issue at about 12.5p, a substantial discount to yesterday's closing price of 19.5p, down 1.25p on the day. It is likely that the package would also include proposals to deal with the pounds 250m of bonds and preference shares.

Unlike rival property developers, which have run into trouble since the market slumped, Greycoat's three main London buildings - Embankment Place at Charing Cross, Britannic House in the City and Buckingham Palace Road, Victoria - are all let and producing income. Its problems stem from financing arrangements based on the assumption that rents would continue to rise.

It is meeting the cost of its bonds although it has not paid preference dividends since April 1992. But the interest on pounds 150m of stepped bonds, used to finance Britannic House, will double to 12.5 per cent in 1996 and it has to repay pounds 50m of bonds in 1995.

Postel has earmarked about pounds 200m for property investment, attracted by the high yields now available, and analysts suggested that it could see a deal with Greycoat as a way of putting money into the market cheaply.