O&Y used Stanhope

SHARES in Stanhope, Stuart Lipton's USM development group, belonging to Olympia & York, the troubled Canadian property company building Canary Wharf in London's Docklands, were used as security for some of O&Y's loans and are understood to have passed into the control of O&Y's banks, writes Gail Counsell.

The shares are worth slightly more than pounds 9.2m, a fragment of the pounds 137m O&Y paid when it bought its 32.6 per cent stake four years ago.

A 9.8 per cent stake in Stanhope's partner Rosehaugh, which, like O&Y, is in the hands of its bankers, is worth just pounds 700,000. The move will leave Stanhope feeling increasingly vulnerable to concerted action by its own bankers.

It has been discussing a restructuring of the group in the event that it falls foul of its banking covenants as a result of collapsing property values.

There is speculation that the banks involved in the rescue of Rosehaugh may prefer to see a portion of the company's interest payments rolled up into equity in its main asset, its half stake in the Broadgate complex in the City, which was developed jointly by Rosehaugh and Stanhope.