BT rules out £2bn property sell-off

Robert Brace, the finance director of BT, has ruled out reducing the company's ballooning debt burden by selling its £2bn property portfolio.

Robert Brace, the finance director of BT, has ruled out reducing the company's ballooning debt burden by selling its £2bn property portfolio.

BT is coming under intense pressure from the City to reduce its borrowing - thought to be £28bn - but has told banks that it isn't interested in off-loading its property assets.

Earlier this year it is understood that BT held separate talks with property firms backed by Nomura, Donaldson Lufkin & Jenrette and George Soros. This led to speculation that BT was set to strike a deal.

But one insider said: "In the end Robert Brace made it clear to us he's not interested in doing a deal. I can't see BT doing a deal while he's there."

Last week the Independent on Sunday revealed that Mr Brace is coming under pressure from shareholders to resign after he was forced to cancel a $10bn (£6.8bn) bond issue.

But many of BT's shareholders, which include Prudential, PDFM and Standard Life, are backing Mr Brace's decision to put the brakes on the property deal, despite concerns about his performance as finance director.

One institutional investor said: "BT would be stupid if they did anything which impaired their flexibility. The institutions want BT to restructure; selling off the property would make that process more difficult."

Another said: "£2bn would certainly help, but it would just create longer-term problems."

Shareholders are worried that selling and leasing back its properties would become just another long-term liability.

Earlier this month credit rating agency Standard & Poor's downgraded BT's rating from an AA+ to A. Despite backing Mr Brace's caution over a property deal, the City wants BT to address its debt mountain.

Nigel Hawkins, a telecoms analyst at Williams de Broe, said: "BT needs a clearer focus. I would like to see BT setting out a racing grid of IPOs [initial public offerings]. First on the grid could be Yell, which could go in the first quarter of 2001; next could be the wireless division in the third quarter. BT needs a can-do attitude."