DHP admits possible breach of Citywest loan terms
Davy Hickey Properties (DHP), a major Dublin landowner, has admitted it may be breaching its loan agreements with bankers in relation to the Citywest Shopping Centre.
One of its subsidiaries, Davyplace Investments Limited, said it may be breaching the loan-to-value (LTV) conditions attached to the loan with its bankers -- although a spokesman emphasised the loan was being fully serviced and the company was trading normally.
Citywest Shopping Centre is situated in the Citywest business campus and hosts a number of well-known retail brands, including Dunnes Stores and Lifestyle Sports.
The subsidiary has provided security to the banks in respect of other Davy Hickey companies, with the loan on the Citywest Shopping Centre among these securities pledged.
"The group may be in breach in relation to loan-to-value covenants on these borrowing facilities," stated the latest accounts for Davyplace Investments Ltd, covering the year to the end of June.
"The impact of this potential breach is that, in certain circumstances, these loans may become repayable on demand."
Davyplace is a wholly owned subsidiary of DHP. According to the accounts, the liabilities of the company exceed its assets and an extraordinary general meeting may need to be held under Section 40 (1) of the Companies Amendment Act 1983.
Loan-to-value covenant breaches occur when the value of the property plunges below a certain valuation range as measured against the size of the loan. Banks and borrowers have a large number of ways to "remedy'' the breach.
For instance, the bank can waive the breach and simply ignore it, or reset a new loan-to-value ratio, or it can demand that the borrower put up additional security to cover the loan.
Depending on the agreement, the bank can attempt to increase the interest rate on the borrower to reflect the falling value of the security underlying the loan.