Canary Wharf in danger of going bust - again

Published 26th Mar 2009

Canary Wharf has revealed that it is in danger of going bust for a second time.

The plunging value of property after various tenants have either collapsed or indicated they may move out means there is a "material risk" that Songbird Estates, the Morgan Stanley-backed consortium that acquired most of the site in 2004, could be in breach of its banking covenants within a year.

The company's final results show that the market value of the property there slumped from £6.76 billion to £4.93 billion last year.

Songbird continues to meet all its financial covenants set out when the company was created and, using December 2008 property prices, it will meet its next covenant test in May, but further falls in the value of its assets could mean a subsequent breach.

In addition, Songbird has to refinance its £880 million of debt by May 2010.

The board has hired Rothschild, the investment bank, to advise on this, and is focusing on how to repay the debt "given the importance of this refinancing and the current uncertain economic climate".

Lehman Brothers, which has a building at Canary Wharf, collapsed in September, though the administrator is still paying the rent. Nomura, the Japanese bank that bought part of Lehmans, is debating whether to remain at the site.

Morgan Stanley has already indicated it may leave and Bank of America is considering whether to leave the site.

The development was initially built by Olympia & York, but the collapse of the property market in the early 1990s sent it into bankruptcy in 1992. Three years later it was bought by various investors including the original builders.

Source: ' Times '

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