Capital & Regional revealed today that it had agreed a deal with lenders to relax the loan-to-value covenant on its £962m Junction retail park fund.

The co-investing fund manager said that lenders had agreed to extend the fund loan to value from 60% to 70% for a period of 12 months.

The fund, which is managed by Aviva Investors and Cap & Reg, has seen its value drop by 13% so far this year, prompting analysts to speculate that it was close to breaching covenants.

Change in direction

Cap & Reg said the loan-to-value covenant of the fund was 56% based on the valuation at 31 August.

As revealed in Property Week, new chief executive Hugh Scott-Barrett is steering Cap & Reg from the co-investment model, and will look to build on the skills the company has as an asset manager.

It is thought that Cap & Reg is in talks with other investors, including Aviva Investors and Hermes, which couldl see the fund wound up when it comes to the end of its life in 2011.