Delancey sinks rescue plan for Plantation Place CMBS

Note holder blocks plan to sell building and waive LTV covenant breach

Plantation Place CMBS investor Delancey has succeeded in blocking a proposal to sell the building and waive the default on the loan-to-value covenant on debt secured against it.

But the building’s owners, which include Invista Foundation Property Trust and Stobart Group, said they would continue to seek a solution to maximise value for all note holders through a sale of the property or equity interest in the special-purpose vehicle that owns it.

Under the original proposal, the LTV waiver would have given the borrowers two years to pursue a sale, and a guaranteed minimum return.

The time frame for a sale is now uncertain, but the borrowers may seek to sell the asset more quickly, given the LTV covenant default hanging over it.

A potential buyer is expected to seek to cure the default by paying down the debt, as under the original proposal.

It is understood that Delancey hoped to buy the Fenchurch Street asset at a discount by collapsing the CMBS structure.

But the deal’s investors are now deadlocked again. An ad hoc group of note holders and the junior lender recently said they would oppose any proposal that may lead to a firesale.

The vast majority of investors that hold notes secured against the 550,000 sq ft City office building approved the owners’ proposal to waive the LTV breach back in December.

Delancey began buying Plantation Place CMBS bonds in 2008 and now owns 26.25% of the Class B notes (equivalent to only 2.41% of the total notes outstanding), after upping its position recently.

At a further meeting for class B note holders on 31 January, it  again refused to back proposals to sell the building. This is a sticking point because at least 75% of each class of note holders must be in agreement before any proposal can go ahead.