Kaupthing threat to Candy brothers' luxury development

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The Property billionaire brothers Nick and Christian Candy were racing to save plans for the world's most luxurious residential development last night, in the wake of the crisis engulfing the Icelandic banking sector.

Today is the repayment date for a $365.5m (£212m) loan owed to Credit Suisse relating to the 9900 Wilshire project in Beverly Hills. But some 60 per cent of the total is held by Kaupthing, Iceland's beleaguered largest bank, which has been threatening to abandon the deal for more than a week.

Against the backdrop of continued turmoil in Iceland's financial services sector, and Kaupthing's UK arm being taken into administration, the tycoons and their banks were yesterday locked in frantic talks to hold the Wilshire scheme together. Statements from the Candy brothers confirmed a desire to keep Kaupthing at the table, but they have also sounded out potential replacement investors to ensure that the development goes ahead.

The eight-acre site was bought by Kaupthing and CPC Group – Christian Candy's Guernsey-based company – last year for $500m. The jointly held Candy & Candy development company is contracted to put into practice designs by the firm of architects Richard Meier and Partners, which will be surrounded by gardens conceived by the landscape designer Laurie Olin. The Beverly Hills project is not the only CPC deal exposed to Icelandic financing. The company's Noho Square scheme to redevelop central London's Middlesex Hospital, including high-end offices, residential units and retail space, also relies on a £220m loan from Kaupthing which runs until 2011.

The banking crisis is wreaking havoc in Iceland's over-inflated banking sector. Kaupthing's main operations were propped up earlier this week by a €500m (£396m) loan from the central bank aiming to stabilise its balance sheet. Landsbanki, the country's second largest bank, was nationalised on Tuesday, freezing the savings of UK customers of its Icesave accounts. Yesterday, similar plans for the government to buy 75 per cent of Glitnir were cancelled, and the third largest bank handed over to regulators, because its problems are even more severe than originally thought.