Business World

Tuesday 23 January 2018

Clash looming as creditors owed £184m to hold talks with Smyth

Donal O'Donovan

LENDERS owed £184m (€218m) are set to clash with Noel Smyth at a meeting on Friday over the falling value of his UK property empire.

Creditors of Alburn Real Estate will file a stock market notice in the coming days setting out their demands for greater oversight of the UK commercial property portfolio.

The bondholders claim the properties need to be more actively managed and invested in to maximise their chances of being repaid.

It sets the scene for a tense meeting in London on Friday, when Alburn is due to meet with the creditors.

The creditors hold bonds issued by Alburn Real Estate Capital, a commercial mortgage-backed security (CMBS) deal. The bonds were used to finance Mr Smyth's acquisition of a portfolio of 45 commercial properties.

Bondholders say their latest action is being taken in order to "stabilise and ultimately improve property values".

The Alburn portfolio was valued at £250m when the deal was structured, but that has since fallen by almost half, according to a valuation undertaken in late 2010 by CB Richard Ellis, a property consultancy firm.

Senior class

Lawyers for the bondholder group say that 75pc of the most senior class of bondholders and more than 50pc of the next most senior class have joined together to call for greater supervision of the assets on their behalf.

The bondholder group is represented by corporate law firm Paul Hastings and includes blue-chip investors BNP Paribas, M&G and Threadneedle.

The stock exchange notice is formally directed at Rothschild, the bank in charge of servicing the debt structure that funded the acquisition of the property.

However, a bondholder source described the notice as "a shot across the bow of the borrower".

The borrower is Noel Smyth's Alburn Ltd. Under a restructuring deal agreed between the borrower and lenders in 2009, some debt covenants were waived for two years.

The waiver allowed Alburn greater flexibility to trade through the property downturn. That waiver period ends in April and a creditor source said that offers lenders an opportunity to take greater control of the situation.

A crucial aspect of the latest jockeying for position in the deal is £4.7m of cash that Alburn set aside as part of the previous restructuring agreement. The cash is currently sitting on account until the waiver period ends and adds an extra incentive to try to gain control of the situation.

If covenant tests are not met, bondholders could insist that a special servicer is appointed to the deal and ensure that the flow of rental income switches from the property owner to creditors.

Irish Independent

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