Heron admits it may never repay pounds 307m debt in full

HERON, the property to petrol pumps group that recently underwent a pounds 1.4bn restructuring, has admitted that because of the European property slump it may never repay pounds 307m of senior bonds in full.

The announcement will confirm the fears of many of the 11,000 bondholders who opposed the terms of the restructuring.

Many Swiss and German bondholders felt during the restructuring talks last year that the plan's assumptions on the Continental property market were too optimistic, and that Heron would face further financing problems.

The company has called a bondholders' meeting for 31 March to propose a delay in interest payments on the senior bonds due on that date. Heron proposes to pay the interest on 30 June instead.

Holders of senior bonds and of pounds 75m of junior bonds will have to agree to the plan. Heron is also proposing that a proportion of the senior bonds should be converted into a new debt instrument, which in turn would be capable of being converted into equity. The junior debt holders have already accepted a similar debt-for-equity swap.

The group, still chaired by its founder, Gerald Ronson, who no longer has a controlling interest, has made pounds 200m of property sales under the restructuring plan.

Heron says a further pounds 75m of property in the UK and Europe will be sold by 31 March. Sales will consist of Heron Homes' house-building division and the business and assets of Heron Suzuki, the motor dealership.

The company says it has recently completed a review of its property portfolio.

'Although this has not yet been completed the preliminary conclusion of Heron International's board is that, as a result of continuing falls in European property values, it is now unable to predict with any degree of prudence that senior bonds can be repaid in full,' it said.

'It is likely that, in addition, certain bank facilities in the Spanish division will require renegotiation.'