Tuesday 27 June 2017

REO presses NAMA to extend loans as debt burden grows

Company controlled by Treasury owes €1.8bn and seeks Battersea project investor

Battersea Power Station
Battersea Power Station

Emmet Oliver Deputy Business Editor

Real Estate Opportunities (REO), the firm founded by Johnny Ronan and Richard Barrett that has debts of €1.8bn, is pressing to have its loans extended and interest payments postponed as talks enter a crucial stage with NAMA.

The company is trying to bring in a fresh investor to fund its Battersea Power Station project and it is understood 15 parties have expressed preliminary interest.

The company, which is ultimately controlled by Mr Ronan and Mr Barrett's Treasury Holdings, got a business plan into NAMA in May and is now awaiting what it calls "broad approval" from the NAMA board.

The Irish Independent understands there have been substantial revisions to the original REO/Treasury plan and an asset-disposal programme has also been discussed.

Battersea is not the only project NAMA is hoping to use to reduce the company's overall debts, it is understood. Treasury could be forced to sell off the Ritz Carlton hotel for instance.

Value

REO yesterday released results for the six months to the end of August. The company is facing a crucial decision in November when the Battersea project is up for a final planning decision. A decision in favour would immediately raise the value of the site and also give NAMA a greater chance of extracting value from REO.

After discussions with NAMA, REO is now only building one project in Dublin at Montevetro in Grand Canal. No tenants have been agreed yet for this site but the company says there is "encouraging interest" from potential tenants.

There is currently a gap between assets and liabilities in the company of €755m. The company is hoping that some of its short-term liabilities, due within a year, can be converted into more long -term debts after talking to lenders, including NAMA.

The company has published the "key assumptions" of its NAMA business plan, which includes NAMA rolling over €780m of debts, deferring interest payments and getting additional working capital. Getting planning permission for Battersea is also one.

Fees taken out of REO by Treasury Holdings for a range of services are to be capped at a certain level.

In the period, €7.5m was earned by Treasury Holdings from REO for project development and management fees.

The company also provided some comments on the property market: "Liquidity remains scarce as the market awaits the finalisation of loan transfers to NAMA".

"Confidence in the property market will not be fully restored until the above process is complete and lenders resume lending. The group's ability to ensure that no borrowing covenants are breached would be at risk from significant further declines in property values," it warned.

Irish Independent

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