O&Y hopeful of refinancing by the autumn

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The Independent Online
OLYMPIA & YORK believes it will have a refinancing agreement in place with its major project lenders within two months, lawyers for the troubled Canadian developer say.

The Toronto-based parent of Canary Wharf, which is trying to convince creditors to exchange debt for equity and tax breaks, has until October to win bankruptcy- court approval for its dollars 20bn ( pounds 10.4bn) restructuring.

But that target will be 'very difficult to meet', according to David Brown, O&Y's lead attorney.' But we think we will have finalised agreements with some (of the creditors) before then, leaving a smaller number to negotiate with.'

Mr Brown warned that the lenders would have to be able 'to understand what is going to happen to Canary Wharf' before any accord could be sealed.

O&Y is to report on Thursday to bankruptcy judge Robert Blair on the progress of its negotiations with its six creditor committees, which are supposed to result in a formal reorganisation proposal by 21 August.

O&Y, owned by Toronto's Reichmann family, has adopted a two-step strategy in the talks to date, seeking agreement with lenders to its 11 projects - for the most part, holders of first and second mortgages on specific developments - before trying to establish how much it can offer other secured and unsecured creditors.

Lenders both to the Canadian parent and Canary Wharf have been asked to forgo debt payments and extend O&Y new loans totalling dollars 1bn in exchange for majority stakes - at least temporarily - in the Reichmanns' holdings.

Paul Reichmann, the firm's chief strategist, has also been seeking new investors to help prevent a liquidation of the Docklands project.

But O&Y's efforts suffered a setback last month when it released financial data for the fiscal year ended January 31, announcing a Cdollars 2.1bn ( pounds 950m) loss, excluding an inevitable write-down for Canary Wharf, that wiped out its book value. Analysts point out there is no collateral value left to support an injection of new money from lenders.

'In order to sustain operations, they need additional financing from the banks,' says Alain Tuchmaier, financial services analyst with the Toronto firm McLean McCarthy.

'We are not just talking about restructuring a static pool of assets and liabilities.'

Nor is it clear what the Reichmanns are bringing to the table in their talks with potential new equity investors, who include Lord Hanson and New York investor Laurence Tisch. Attention has therefore focused in recent weeks on potential tax breaks, both in the UK and Canada.

The Department of Transport declined to comment on a weekend report that the European Investment Bank is in talks to provide a pounds 200m loan for the planned Jubilee Line extension to Docklands.