Ronan and Barrett's last jewel 'heading for default'
Published 18/12/2012 | 05:00
S&P cuts ratings on venture's bonds as portfolio's massive loans fall due next month
The warning comes as the huge property loans come due for repayment on January 15.
The debts are linked to a high-end portfolio of major Irish commercial properties, including the Stillorgan Shopping Centre in Dublin and Merchants Quay in Cork.
They escaped being caught up in the collapse of Ronan and Barrett's Treasury Holdings into liquidation earlier this year.
That's because a complex borrowing technique known as commercial mortgage-backed security (CMBS) structure, which is separate to Treasury's bank debts, was used to finance the portfolio.
The CMBS structure uses bonds and is known as "Opera Finance CMH". It faces crisis when the loans fall due next month.
"We consider that the CMH loan is likely to default at loan maturity in January 2013.
"In view of this, and current market conditions, we have lowered our expectation of recoveries from the properties and we anticipate that losses may be incurred on the loan and the notes," Standard & Poor's has warned.
Standard & Poor's cut the credit rating for each of four classes of bonds in the CMBS structure because of the looming maturity.
Losses for lenders mean the owners will see their stake in the properties wiped out.
Last week bondholders were told that law firm Paul Hastings has been hired by one lender to advise on the next steps for the structure.
It is just the latest of a number of advisers brought in to help tackle the debt pile.
Investment bank Cairn has already been hired to manage the process for a second group of bondholders.
NAMA is owed €85m as part of the deal, but its debt is last in the queue to be repaid, suggesting the state agency will recover little on the loan.
Despite strong rental income and excellent tenants, the assets are now valued at €270m, not the €460m secured on the properties.
It means there is no hope of refinancing the loans.
The best-case scenario is that lenders, mainly international bondholders, will agree to a "standstill" on January 15, leaving the loan in place while they try to find a buyer or buyers for the assets.
That may not be difficult, depending on the scale of loss that lenders are prepared to see realised by a sale.
Irish commercial property is starting to attract international attention.
Last week UK-based 'Property Week' named Kennedy Wilson, Texas Pacific Group, Patron Capital, Northwood Investors and Apollo Global Management all as potential buyers of the "Opera" properties.