Stanhope looks at merger

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The Independent Online
STANHOPE Properties confirmed yesterday that a review of its future may lead to the raising of new equity and a restructuring of the group's pounds 130m debts.

One option being considered is merging with Broadgate Properties, the developer it owns in a 50-50 joint venture with Rosehaugh, which is now in receivership.

Stanhope has pre-emption rights over the half of Broadgate it does not own. Broadgate, which developed the huge Broadgate Centre by Liverpool Street station in the City, has debts of pounds 750m.

The figure has been reduced from a peak of pounds 1.2bn; the latest inroad was made by the sale last week of the City headquarters of the European Bank for Reconstruction and Development, owned by Broadgate. The building was bought by a Deutsche Bank property fund for pounds 179m, and brought cheer to the London property market, as it confirmed the recovery at the top end of the office market.

A spokesman for Stanhope said the company had seen a significant improvement in market values for well-let, high-quality properties, and that letting at the Broadgate and Ludgate developments had seen an upturn.

But the recovery had come too late to boost Stanhope's full-year results to 30 June, which are due in a fortnight.

An injection of new equity would dilute existing investors' holdings, but the company is understood to believe that a smaller interest in a well-financed company would serve them better in the long run.

It is understood that the proposals being considered could leave investors with just 20 per cent of the equity, unless they subscribed for any new issue.

The chief executive, Stuart Lipton, would see his 31 per cent stake diluted to about 6 per cent.

The group, which has debts of pounds 130m, may offer its lenders 10 per cent of the company via a debt-for- equity swap.

Stanhope's current share price of 36p gives a market capitalisation of pounds 60m.