Friday 23 March 2018

Northwood Partners hikes bid for former Treasury buildings to €310m

Donal O'Donovan

Donal O'Donovan

US-based Northwood Partners has hiked its bid for a portfolio of former Treasury Holdings buildings to €310m in an effort to kill off Kennedy Wilson's previously recommended offer.

The last-minute approach reignites a long-running takeover battle for 16 buildings that were put up for sale by lenders at the start of the year after Treasury Holdings failed to repay a €375m loan.

The bondholders are selling a portfolio dubbed – the Opera Finance CMH assets – that includes the Stillorgan Shopping Centre in Dublin, Merchants Quay Shopping Centre in Cork, and a plethora of high-end office blocks that include Bank of Ireland's headquarters on Mespil Road, FAS's offices on Baggot Street, and KPMG's main Dublin offices. Northwood was an under bidder in the initial process to sell the assets that had looked to be over last month. In May, subcommittee of the lenders recommended a €306m joint offer from US investors Kennedy Wilson and Varde of €306m.

Dozens of bondholders left out of pocket when the debt went unpaid are due to vote on that offer on June 26 at the offices of law firm Allen & Overy.

But Northwood now says its offer is worth at least €10m more than Kennedy Wilson's bid, because under that proposal the buyer of the assets will receive €5m in rents from the period prior to the purchase.

Northwood said sellers will also benefit under its proposal because it will keep the complex debt structure secured on the assets intact and thus avoiding any risk that a capital gains tax bill could fall due that would eat into the value that the sellers recover on a deal.

It's not clear how large such a bill would be, but a €52m capital gains tax liability was "embedded" into the Opera CMH bond structure when the deal was put together in 2006. That was based on the record property values of the period. Under the Kennedy Wilson offer the most well-secured "Class A" lenders will be repaid in full from the proceeds of the sale.

Class B lenders will get 96.5pc back, Class C lenders will receive 20.6pc while Class D lenders will get 7.4pc or €2.6m.

Under the new Northwood offer "Class A" lenders will also repaid in full from the proceeds of the sale, unless they opt to roll into a new bond deal.

More junior Class B lenders will also get back 100pc, Class C lenders will receive 35pc while the junior Class D lenders will get between 10pc and 14.pc, according to the offer documents.

If bondholders do back the new offer Kennedy Wilson and Varde will be paid €625,000, plus any VAT, to cover their costs under an "abort reimbursement"agreed when the offer was recommended.

Irish Independent

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