As expected, Postel is to underwrite a pounds 58.5m one-for-four rights issue by Greycoat at 12.5p a share and a one- for-one preference issue at the same price, raising pounds 6.25m. It will also sell Hill House, one of its London properties, to Greycoat for pounds 58.5m - pounds 8.5m in cash and 125 million preference shares - and is buying 30 million ordinary shares for 15p each.
The deal is designed to save Greycoat from administration which, it warned yesterday, was a real threat. So far it has been meeting its interest payments although it suspended dividends on its preference shares last October. But the valuation of its property portfolio at the end of March meant it risked breaching a key banking covenant, which stipulates that net debt should be no higher than 1.66 times shareholders' funds.
The group would not reveal the level of borrowings, but the Postel deal is conditional on net assets being greater than pounds 80m. Debt at the halfway stage was pounds 359m.
Alistair Ross Goobey, chief executive of Postel, said the deal reflected his belief that the property market had bottomed. 'We believe that, over the time span we are looking at with this investment, rental growth will re- establish itself,' he added.
Mr Ross Goobey said there could be opportunities for co-operation between Greycoat and Postel's property holdings, which account for about 12 per cent of its pounds 20.4bn assets under management.
The restructuring package has to be approved by the holders of Greycoat's pounds 200m bonds, who are being asked to change their terms, and pounds 50m of preference shares.Reuse content