O&Y bankruptcy threat

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NEW YORK - The US arm of Olympia & York, the only part of the big property empire that has remained out of the hands of administrators, could be forced into bankruptcy by a dispute among its creditors and the administrator of its Canadian parent, writes Larry Black.

Creditors of the American company, which is 80 per cent owned by the bankrupt O&Y Developments of Toronto, are demanding that an independent board be appointed to oversee reorganisation.

But the Canadian administrator, Robert Lowe, of Coopers & Lybrand in Toronto, insists that the parent retains control of the board of Olympia & York (USA). He has the support of the parent company's creditors, who want guarantees that they will receive their share of any residual value left in the subsidiary.

Before last May's bankruptcy, resources of the US operation were diverted by the former O&Y president, Paul Reichmann, to Canary Wharf in London, and the subsidiary has suspended payments on most of its debts since then.

The parties are expected to ask a US bankruptcy court judge to rule.