In an unprecedented deal, Barclays will take over the ownership of Imry by swapping pounds 100m of debt for preference shares. It will continue to provide pounds 126m in existing banking facilities.
The pounds 240m provision, a record by Barclays for a single company, had been well leaked, but institutional shareholders and analysts were worried and angered by the sheer size of the problem, and what it might imply for the rest of Barclays' lending.
Imry specialised in prestigious commercial projects, such as the Royal Mint building in the City. Its redevelopment of the Rose Theatre site in Southwark, one of the earliest venues for Shakespeare's plays, enraged many archaeologists and actors.
Many analysts criticised the bank for being the sole lender to Imry, instead of forming a syndicate of lenders. There were also fears that the write-off might tip Barclays into a loss for 1992, and that the dividend might be cut.
'It's quite possibly the worst loan of this recession that we're aware of,' said Chris Ellerton, senior banking analyst at SG Warburg. 'It's extraordinary that a bank of Barclays' stature would allow itself to get exposed to this extent on its own. There has been a question mark over the judgement of Barclays during the last two to three years and this underlines that question mark.'
Barclays' shares dipped on the Imry announcement from 387p to 376p before recovering at the close to 379p. Coincidentally Moody's, the credit rating service, yesterday cut Barclays' rating on dollars 10bn of senior long-term debt from Aa1 to Aa2, blaming among other things 'large charges for bad debt, particularly in the UK property and construction portfolio'.
Barclays refused to be drawn on who was responsible for the lending to Imry. A spokeswoman for the bank said that 'usual loan procedures were followed in this case. This was authorised by a loans committee at the highest level'. She said that loans procedures were always under review.
Asked whether the Imry losses would damage the standing of Mr Buxton, who takes over as chairman of Barclays in January, she replied: 'No - the loans were authorised through usual procedures.'
Imry's problems stem from a highly geared pounds 314m buyout in 1989, mostly funded by a Barclays loan of pounds 214m, which took the then Imry Merchant Developers private. In 1991 the property slump forced Barclays to decide whether to 'double or quit'. In the event it agreed to allow Imry to take up another pounds 220m of previously agreed facilities, and Barclays' exposure eventually climbed to pounds 440m.
In August this year Imry's chairman, the German financier Wolfgang Stolzenberg, was hit by the collapse of his Canada-based Castor Holdings with debts of Cdollars 1.8bn ( pounds 800m). Two months ago the rest of Imry's management, led by Martin Myers, bought Mr Stolzenberg's stake for an undisclosed sum. Yesterday the company said that Mr Stolzenberg and his associates had resigned as directors of all Imry Group companies.
The City had assumed that Barclays had already provided about pounds 140m against Chester Holdings, the private company that bought Imry in 1989. But yesterday the bank disclosed that only pounds 75m had been provided against Chester in the first half of 1992.
Yesterday David Davies, who was chairman of Imry Merchant Developers in the two years before the 1989 buyout, returned as chairman of Imry Holdings.
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