Citypoint spots Beacon of hope
9 Bondholders would profit from innovative £535m debt restructuring of City tower
Beacon Capital Partners is close to agreeing an innovative restructuring of the £535m of debt secured against the Citypoint tower in the City of London, which would allow it to keep control of the underwater asset.
Property Week can reveal that Beacon is close to completing an agreement with the securitised bondholders that provided the debt for which Beacon will receive an extension and breathing space on interest payments, in return for increased future interest payments.
The innovative restructuring means bondholders will receive this increased payment at the “back end” of the deal, if the value of the building is increased and it is sold or refinanced — a structure that has not previously been put in place for a securitised loan in Europe.
Beacon has been in talks with bondholders for several months over Citypoint’s loan-to-value and interest-cover issues. It bought the property for £650m in 2007.
The 703,382 sq ft, 34-storey tower was last valued 13 months ago at £447m — £88m less than the £535m of debt secured against it. Morgan Stanley provided £429m of this debt and then sold it to bond investors, and £106m is in the form of a junior loan, both of which mature in July 2014.
More serious than the loan-to-value issue is the fact the £27.7m income from the building is not sufficient to cover interest payments on the loan.
In January, a top-up account set up by Beacon to cover this shortfall ran out.
The building is 7% vacant. Australian bank Macquarie left 50,000 sq ft when it moved to nearby Ropemaker Place last year. Beacon proposes to provide up to £20m of the equity required to undertake refurbishment works and let the vacant space in the building.
The £20m would not go towards paying down the loan or paying interest.
To allow it to execute an effective asset management plan, the loan will be extended to 2016, and loan-to-value and interest payment covenants will be waived. In return, bondholders will receive an increased interest payment margin, as with many securitised deals where the loan is extended.
AgFe advises Beacon; Brookland Partners advises the special servicer that represents the bondholders.
All parties declined to comment.