Canary Wharf banks agree funding for Jubilee Line

BANKERS to the failed Canary Wharf development in London Docklands have agreed a financing package for the extension of the Jubilee Line that should allow the pounds 1.7bn scheme to go ahead.

A spokesman for Ernst & Young, administrator to Canary Wharf, said: 'The administrators expect to make a formal offer to government by Wednesday. They anticipate it will be in a form which replicates the original offer from Olympia & York (the Canary Wharf developers) which had been agreed but was never signed. They believe and are hopeful that the offer will be acceptable to the Government.'

The 11 banks to Canary Wharf, which are owed more than pounds 570m on the project, are believed to have agreed to put up pounds 170m - an initial payment of pounds 80m with the remainder over 25 years. Olympia & York had agreed to put up pounds 400m, but the delayed terms of the payment made that worth about pounds 170m in today's money.

The Government has always insisted that the scheme will not go ahead without private funding. In return for the financing, the banks are believed to be insisting that the Government chooses Canary Wharf as the site for the relocation of about 3,000 civil servants from the Department of Environment and the Department of Transport. It is also considering three other sites in the area.

The banks believe the 10-mile Jubilee Line extension, from Green Park to Stratford via London Bridge and Canary Wharf, is vital to attracting tenants to the development. Last week, Chemical Bank said it was abandoning its planned move to the scheme in favour of Albany Gate in the City while American Express is also believed to have pulled out.

Although these defections were partly because the administrators were refusing to finance the fitting out of the buildings to the agreed specifications, the uncertainty over transport links is also likely to have been a powerful deterrent.

The administrators are keen to find a buyer for Canary Wharf, which would be easier if more of the property was let. Many potential tenants have been deterred by concern among staff about the difficulty of travelling to the area. The extension would also be welcomed by other developers trying to let and sell property in the East End.

If the extension is approved, it will help recession-hit construction companies, some of which have been urging the Government to go ahead with the project to counteract some of the damage done to the industry by the prolonged building slump. London Underground has been prepared to start work since March and the contracts are all ready to be awarded.