The plan also gives the creditors, owed about USdollars 12bn ( pounds 7.6bn), a 49 per cent stake in the firm's more profitable US properties, leaving control with O&Y's owners, the Reichmann family.
But the new US company, to be known as O&Y Realty Holdings, would pay the parent dollars 500m over the next 10 years, guaranteeing the creditors a further payout if they take control in 1997.
O&Y's Canadian properties would be spun off into a new company, but three in Toronto would largely be turned over to four Canadian banks and two other buildings surrendered to the mortgage lenders.
The parent firm, whose board would include an equal number of bank and Reichmann appointees, would also control O&Y's interest in Canary Wharf, the pounds 3bn London Docklands development taken over by administrators earlier this year.
Unless property values rebound sharply in North America, the deal, which will be put to a vote by creditors late next month, would leave the once-mighty Reichmanns with only 10 per cent of their Canadian properties and a half-share in their US arm.
O&Y USA, while not formally in bankruptcy, has been forced to surrender two buildings used as lending collateral and continues to renegotiate its dollars 5.9bn debt.
Several lenders are said to oppose the plan, which will see O&Y pay no interest on its debts for the five-year period, using any revenues to pay down the principal.Reuse content