O&Y Companies (USA) yesterday met its 75 major creditors, asking them to forgo principal payments for five years and to accept interest payments only on loans backed by profitable properties. But conflicts among the owners and creditors of the firm's centrepiece development, the World Financial Centre, appear insurmountable, analysts said.
Earlier this year, O&Y defaulted on an dollars 800m (pounds 470m) bond issue held by a consortium of Japanese banks, as well as an unsecured dollars 160m loan led by the JP Morgan bank. JP Morgan and other members of its syndicate boycotted yesterday's meeting, but other banks have delayed foreclosure, apparently because of hints that O&Y might offer them equity in the complex as part of a debt restructuring deal.
But an investigation by securities regulators in Canada has revealed that the project is already one-third owned by an undisclosed partnership involving O&Y's Reichmann family and Carena Developments, a Toronto property holding company controlled by the Bronfmans, another wealthy Canadian family. O&Y apparently sold the stake three years ago, when it first encountered problems raising money to continue the construction of Canary Wharf in London.
Dividend payments owed to equity holders in O&Y properties - including dollars 5.6m due to Carena - were suspended in July under the terms of an informal forbearance agreement the firm reached with its creditors. But Carena, which is itself facing financial problems, has threatened 'to take action to protect its investment' if the dividends went unpaid after yesterday's meeting.
At the meeting, O&Y (USA) chief executive John Zuccotti renewed has appeal to creditors not to force the firm to file under America's Chapter 11 bankruptcy law, predicting the company would have a positive cash flow within 36 months.