Songbird Estates, the AIM-listed owner of more than half the buildings in London's Canary Wharf, has said there is a 'material risk' that it could breach a loan covenant within the next 12 months unless it is able to refinance a loan of £880 mln (EUR 943 mln).
Songbird Estates, the AIM-listed owner of more than half the buildings in London's Canary Wharf, has said there is a 'material risk' that it could breach a loan covenant within the next 12 months unless it is able to refinance a loan of £880 mln (EUR 943 mln).
The warning comes as the group reported a massive drop in net asset value for 2008 and a pre-tax loss of £1.8 bn compared to a profit of £182 mln in 2007.
Songbird said its position had been pressured in 2008 by the impact of the market turmoil on the real estate sector, specifically the plunge in property valuations. In addition, the global financial downturn had severely affected Canary Wharf, a centre of financial institutions.
The market value of the property portfolio at end-December 2008 was £4.9 bn, a reduction of 19.8% since end-June and 26.5% over the year. Net assets fell from £2.3 bn in 2007 to £459.7mln at end-December 2008. This amounted to a reduction of 80.4%.
In the event of a covenant breach the lender would have the right to demand early repayment of outstanding borrowings. Songbird added: 'This represents a material uncertainty which may cast significant doubt on the group's ability to continue as a going concern and, therefore, it may be unable to realise its assets and discharge its liabilities in the normal course of business.'
The group's loan to value ratio stood at 86.1% at end-December as gross debt increased by £480 mln to £5.5 bn. The loan covenant ratio is 87.5%. Financial Controller Russell Lyons said during a conference call on Thursday that Songbird had 'minimal headroom' to avoid default due to the revaluation of its portfolio. Songbird has hired independent investment bank Rothschild to advise it on refinancing the Citibank loan that expires in May 2010.
