Treasury Holdings vehicle REO relies on Nama and creditors to stay solvent

 

REAL ESTATE Opportunities (REO), the listed property investor backed by Treasury Holdings, is relying on the support of the National Asset Management Agency and a number of other creditors to stay solvent, the company said yesterday.

REO, which owns London’s landmark Battersea Power Station and a number of high-profile Dublin office blocks, said yesterday that the total value of its properties fell 4.3 per cent over the six months to August 31st to £1.05 billion (€1.2 billion). Its debts on that date stood at £1.66 billion.

Along with its properties, the company had cash of £39 million, and shareholders’ funds stood at £755 million. REO is listed in London and its biggest shareholder is Treasury Holdings, controlled by John Ronan and Richard Barrett.

REO said yesterday that it had submitted a business plan to Nama, the agency that has taken over troubled property loans from Irish banks as part of the State’s recapitalisation plan. The company owes it £780 million.

The company said the plan is based on a number of assumptions, including Nama renewing the £780 million debt on its original terms. It also wants the agency to defer interest payments and to provide working capital.

Along with this, the company needs the holders of its convertible loan stock and loan notes to agree to defer interest payments due this month, and to change the terms of the repayment of these debts, which are due at the end of May.

REO added: “Failure to achieve the above assumptions and objectives could cast significant doubt on the group’s ability to continue as a going concern and it may therefore be unable to realise its assets and discharge its liabilities in the normal course of business.”

The company indicated yesterday that it is close to resolving a number of these issues. It has renegotiated the terms of the loans relating to Battersea, which it bought for €600 million in 2006, with Lloyds Bank and Nama, which took over a €100 million debt owed to Bank of Ireland.

Lloyds and Nama have agreed to extend the repayment terms to August next year and have waived breaches of terms. REO plans to recruit a partner for the plant’s redevelopment and float it off.

It has agreed the outline of a plan to restructure the liabilities owed to the holders of its convertible loan stock and loan notes, and the owners of zero-dividend preference shares issued by the company; this will allow Battersea’s demerger.

Creditors have agreed to defer all principal and interest payments until the end of next May. They will get equity in Battersea when it is floated off. The holders of the convertible stock and preference shares include Treasury Holdings and a number of REO directors.

They, along with ordinary shareholders, will have the opportunity to vote on a number of the restructuring proposals at a general meeting that the company must hold before the end of January. The holders of close to 60 per cent of both instruments are backing the outlined restructuring plan.

REO is likely to issue further statements relating to the various aspects of its restructuring proposals over the coming weeks.

The company said the directors have a “reasonable expectation” REO will continue to meet its liabilities.