View from City Road: Heron in a class of its own

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Only in the topsy-turvy world of the City could advisers collect fees of more than pounds 50m for putting together a restructuring that was doomed to failure from the start. And only in the City could the same bunch of advisers - mainly UBS, Price Waterhouse and Allen & Overy - continue to rake in fees for trying to sort out the mess they helped to create.

In the context of this headline figure, the pounds 5m five-year pay deal awarded to the man ultimately responsible for the collapse, Gerald Ronson, seems almost reasonable. Heron is a travesty in far too many ways.

Not that it is the first to clock up mind-boggling fees in an attempt to salvage something from the wreckage. Queens Moat will have spent pounds 42m sorting out its own mess by the end of the year and Brent Walker is still counting at pounds 55m.

Heron, however, is in a world all of its own. What singles it out is the size of the rewards for putting together a debt restructuring whose main premise - a recovery in property values in the UK and Spain - looked woefully optimistic from the outset.

The reality of the past 12 months has been totally different from that forecast. In the UK, gently rising demand has signally failed to mop up chronic oversupply. In Spain, values have collapsed - worse, its market is generally perceived to be at least two years behind the UK and so unlikely to recover for the foreseeable future.

It is no wonder that Heron found itself unable to pay its debts in March and no wonder that the cost of last year's refinancing has turned out to be a complete waste of money.

Bondholders now have a choice - they can either give a group of US investors a high-profile property portfolio on the cheap, or they can dig in their heels and demand a full debt-for-equity swap that would allow them to benefit from improving values as and when they come.

The wait for UBS and Swiss Bank, who put together the investors, will as usual be rather less onerous. The meter is running.