Capital & Regional has admitted it is close to breaching a loan-to-value covenant on its £2.9bn Mall shopping centre fund.
The co-investing fund manager made a statement to the Stock Exchange after its shares fell 13% to 382p in the wake of a downgrade from JP Morgan analyst Harm Meijer, which cited worries about the Mall’s debt levels following a fall in asset values.
Playing hardball
Cap & Reg said that, while there was no loan-to-value on the £1.4bn Mall bond it had issued, the partnership deed on the fund and the terms of a £300m capital expenditure facility provided by Royal Bank of Scotland said that the funds loan-to-value ratio should not exceed 60%.
It went on to say that as at the end of March the fund’s loan-to-value ratio as tested for the RBS facility stood at 58.8%.
In his note yesterday, Meijer said that ‘RBS could play ‘hardball’ on a breach’ and force asset sales because of its own capital raising issues.
Realisation
‘As we mentioned in our preliminary results announcement, the Mall has a number of options including, but not limited to, realisation of assets which will ensure that the Mall remains within the agreed covenants,’ Cap & Reg said.
‘The Company and Morley Fund Management, the fund manager of the Mall, are working closely together to this end.’
Cap & Reg said it would provide more information with its interim management statement on 16 May.
