Capital & Regional saw its shares plummet this morning after a leading analyst downgraded his view on the company.
Shares in the retail and leisure property fund manager fell 7% to 402.5p this morning in response to a downgrade to ‘neutral’ from JP Morgan’s Harm Meijer.
‘The recently announced capital raisings by RBS and HBOS have caused us to review our high risk call on C&R,’ said Meijer in reference to the company’s two main lenders.
Meijer said he was concerned that Capital & Regional’s Mall fund was close to breaching its loan-to-value (LTV) covenant, particularly since a £300m disposal of assets had yet to be completed: ‘The Mall fund is key to C&R because of its contribution to NAV, which we estimate at 417p a share.
'However, we believe the 60% LTV covenant has become an issue, as the announced £300m disposal has not yet transpired, LTV has reached 57%, while RBS could play ‘hardball’ on a breach.’
Meijer estimates that the 60% loan-to-value limit related to the Mall ‘may be breached if values drop by 5%, potentially triggering an uncertain situation for C&R and forced sales in a worst case’.
