A SYNDICATE of banks, led by Irish Intercontinental Bank (IIB), has appointed Mr Tom Grace, of accountants Price Waterhouse, as receiver of Power Corporation. This follows a request by the company, it was confirmed last night. Also, a management buy-out team, led by former chairman and managing director, Mr Tony Leonard, has acquired the Irish properties.
Power last night said it "has had to succumb to creditor pressure" and requested the appointment of a receiver to the parent company. The group did not specify the creditors involved but they are understood to be banks outside the syndicate which are owed around £8 million and which had parent company guarantees.
A spokesman for lIB noted that the syndicate had explored many avenues including an equity injection by investors over a long time. These, however, failed and the receivership is the "only sensible option".
Mr Tony Leonard resigned from the group on October 24th so that he could acquire the Irish assets as going concerns. As a result, Power said that the main Irish assets, the Powerscourt Townhouse Centre Dublin and the Savoy and Queens Old Castle Centres in Cork are not affected by the receivership.
The other board members took legal and financial advice and accepted the proposals with the management buy-out team. The board members said they took a number of factors into account, such as the size of the financial deficit - understood to be £70 million to £80 million - and that the only party which could be affected was the syndicate which approved the deal.
The group noted that the transaction ensures that the ongoing businesses in Ireland "can continue to trade without disruption" thereby protecting the 32 employees, the creditors and the tenants of the shopping centres.
Mr Leonard has been joined in the management buy-out by some of the Power executives. It has been largely financed with venture capital backing. The consideration and identity of the venture capital group have not been disclosed. The venture capital group, however, is understood to be British.
Power noted that over the years the management and board of Power have, with the help of their advisers, and the co-operation of the bank syndicate, which is owed £100 million (the secured bank creditors are owed a further £90 million) sought to find investors who, by subscribing for equity and/or loan capital, would allow the group to continue in business as a publicly quoted vehicle. A large number of possibilities were pursued "some of which appeared likely to succeed at the time".
Power confirmed that the recent restructuring proposal - with British property developer, Mr John Beckwith - had been "virtually completed in that after many months of preparation, documentation was in final draft stage for issue to shareholders for approval". However, as investors know this failed to materialise.
Mr Grace, as receiver, will now focus his attention on the non-Irish parts of the group. These include one property in Britain, the Royal Exchange Shopping Centre, in Manchester. The bulk of the group's property portfolio, accounting for around 85 per cent of the total, is in the US. These properties consist of the San Francisco Shopping Centre; The Rhinelander Mansion, Madison Avenue, New York; 345/34 7 Rodeo Drive, Los Angeles; an interest in the Ambassador Hotel site in Los Angeles; and interests in 256 Worth Avenue, Palm Beach, Florida.
