Warner Estates has appointed Rothschild to restructure the business following ‘further increased pressure’ on its banking covenants.

In its interim management statement this morning, Warner, said that despite its lenders increasing its loan to value covenants in September to ‘create more headroom’, it had since been hit by falling property values.

The renewed pressure on its banking covenants comes despite having reduced its debt from £349m at 30 September to £323m at 31 December through seven property disposals which raised £34.7m – sold at 5.1% below September values.

It said: ‘The group has continued to experience further declines in the value of its property portfolio. This has further increased the pressure on the group's valuation related banking covenants.’

Falling interest rates combined with the cancellation of its hedges reduced the average cost of the group’s debt from 4.71% in September to 3.94% in December.

Warner also reported that it was in talks with its lenders about the restructuring of debt in its four 50:50 joint ventures – Agora Shopping Centres, Agora Max Shopping Centres, Greater London Offices and Radical Distribution.

It said: ‘The decline in property values and the maturing of certain facilities has led to discussions with each of the JV lenders to establish the most appropriate form of financing structures for the JVs.’

It saw a £1.4m fall in overall profit in the nine months to 31 December, which it said was in line with expectations – apart from losses from disposals in its Apia Regional Office Fund.