Lauren Parr profiles some of the advisers that took roles in recent property debt restructurings
Although it has kept out of the media spotlight, the global advisory-focused investment bank is seen as one of the major restructuring firms, having taken part in some of the biggest property debt work-outs in recent years – Four Seasons and Plantation Place, for example.
Acting for the servicer, it was also behind the restructuring of care home owner NHP’s debt and the restructuring of Welcome Break in 2003. It has recently been mandated by Uni-Invest to review the Dutch Investment fund to enhance stakeholder value.
Houlihan, which has expertise in mergers and acquisitions, capital markets and valuation, as well as financial restructuring, first set foot in Europe in a joint venture with Close Brothers at the end of the 1990s.
By 2002 it had established itself independently in London, where it first worked mainly for creditor groups. Now it acts for “all the parties you’d meet at a restructuring table,” says Gijs de Reuver, a director in Houlihan’s European restructuring practice.
The bank has expanded its client base to an equal balance between companies, shareholders and creditor mandates, representing both senior and junior creditors where appropriate. Its London office employs 40 restructuring experts. It also has offices in Paris and Frankfurt and employs a total of 120 staff in Europe.
Despite lacking a dedicated real estate team in the restructuring arm, the group has acted on various structured credit and real estate deals. It advised on Martinsa-Fadesa’s debt restructuring and acted for senior creditors in the Fleet Street Finance 2 CMBS.
Joe Swanson, joint head with Peter Marshall of Houlihan’s European business, previously structured real estate deals at Bear Stearns and had a hand in most of Houlihan’s real estate deals, as did senior vice-president Chris Foley.
De Reuver says he expects to see more real estate restructurings. Marshall adds: “CMBS is difficult to restructure because the documentation is not set up for it. There are nuances in dealing with CMBS deals – particularly who has authority to take action. A large part of our role is making sure it is a process that is properly managed.”
Cairn and Brookland Partners have emerged as two of the leading CMBS restructuring specialists, giving the teams at the boutique investment banks a run for their money.
While Brookland has acted mainly for servicers and special servicers, Cairn has “acted for the borrower and the sponsors in all deals – except Opera”, says property head Peter Hansell, a former managing director of Lehman Brothers’ global real estate group. The Dutch Opera Uni-Invest CMBS is Cairn’s most recent mandate, working for special servicer Eurohypo (see Feb 2010 issue).
Cairn was established in 2004 (see profile, Feb 2009 issue) and Hansell says one of its main strengths is its “depth of relationships with note holders and our ability to identify and communicate with them”.
But it is hard to generalise about the type of advice Cairn offers. Hansell says: “We are effectively involved in managing the whole gamut of the restructuring process: liaising between note holders, borrowers and all other parties, including advisers; building the book on the individual issues, which means finding out who the note holders are through the documentation; and organising extraordinary general meetings.”
Cairn is or has been involved in CMBS deals including REC 4, Fleet Street 1, 2 and 3, Windermere IX and Opera Uni-Invest.
“The nature of restructurings has been different on every deal, but the goal has been to arrive at consensual restructuring between the lender and the borrower,” Hansell says.
The first task in any CMBS restructuring is to identify the bond holders – not always an easy task, as notes can be widely spread through the market. “Through all our work we’ve continued to track where notes live, which takes time and relationships; it’s the first major hurdle,” says Hansell. “Then we advise the borrower on the options available.
“Convening a note holders’ steering committee, or working with the servicer to discuss with note holders their views on the deal, can be another hurdle, because if note holders join a private steering committee, they’re precluded from trading bonds until they are cleansed” – ie restructured. “Note holders are reluctant to do that without a detailed understanding of the purpose of the committee, timing and cleansing process.”
All the deals Cairn’s eight-strong team has worked on have involved private talks between borrowers and note holders, followed by a public vote, then approval for and documentation of those changes. “We are involved in every part of that process,” says Hansell. The shortest restructuring period is typically four to eight months.
Hansell says the final hurdle is “reaching quorum and making sure you get 75%-plus of note holders voting”.
Most of Giltspur’s deals have had a low profile, as its work is typically “word-of- mouth type stuff”, says chief executive John Deacon, who set up the firm in 2007 after quitting UBS, where he had been head of the asset-backed trading group in London.
Initially, Deacon intended Giltspur to be a credit fund, but it changed course because of difficulties with raising capital.
“We stopped marketing the credit fund because investors were too traumatised and there was less value in the market with the rally from March 2009. But the advisory side grew a lot faster than we anticipated, due to the fallout from the crisis,” Deacon says.
With around six contracted staff, Giltspur advises on distressed assets. As part of that business it teamed up with Savills to form a CMBS and real estate deal venture. Although Giltspur’s remit also includes CDOs and RMBS, this tie-up is purely CMBS based.
“Savills has all the advantages of a large multinational with real estate expertise, while Giltspur has specialist expertise in CMBS and understanding bond holders and how they work. We’ve been working on a range of products, mainly looking at CMBS deals coming up for restructuring,” says Deacon.
The market for deal restructuring has been a lot slower than anyone anticipated, he adds. “Most servicers are not saying ‘I need help here’; they’re deciding to wait six months or a year before doing that.”
Giltspur also launched a free database last July with Savills, designed to initiate communication between bond holders.
Moelis & Co
Los Angeles-based Moelis is a new boutique investment bank set up in July 2007 by former UBS banking star Ken Moelis.
Its staff work for clients around the world. One of its biggest mandates last year was working with Rothschild on restructuring Dubai World’s $26bn in debts, after the conglomerate was undone by real estate.
The restructuring team advised the bond holders in the Fleet Street Finance 2 work- out last year. The bank poached Matthew Prest in 2009, who had been head of restructuring at Close Brothers in London.
In the matrix of loans backing Whitehall Funds’ €4.5bn Karstadt sale-and-leaseback – including the Fleet Street Finance 2 – there was a second senior loan of €890m made by German bank Valovis. Leonardo advised Valovis, which had to give its consent to the Fleet Street 2 restructuring.
Leonardo is one of Europe’s fastest-growing boutique finance houses and this month bought Sal Oppenheim’s Swiss corporate finance business. It does not have a London office, but is likely to advise on more German real estate restructurings.
Investment banking muscle backs Lazard’s advisory work
Lazard is advising Royal Bank of Scotland on the sale of a £3bn portfolio of its £36bn of non-core commercial property loans – a deal the market is watching with interest.
The aim is to create a structure to sell the portfolio of loans into, as part of RBS’s strategy to deleverage its £84bn property loan book. The adviser is thought to have sounded out potential investors that might want to inject equity into the vehicle; one source says it “has spoken to sovereign wealth funds and private equity firms”.
Lazard is also expected to help secure debt from lenders to finance the vehicle. It is also involved in the ongoing Highcross/Alburn Real Estate debt buy- out offer for notes in the REC 6 CMBS, and advised on one of the highest-profile non-debt restructuring mandates: Simon Property Group’s approach to Capital Shopping Centres.
With 85 staff across nine offices, Lazard is one of the largest global investment banking, restructuring and capital structure advisory practices. Besides restructuring, the firm provides advice on mergers and acquisitions, capital raising and asset management services.
What separates Lazard from its peers is its ability to provide the resources of an investment bank, without the conflicts associated with financing, credit or trading activities.
Lazard is led in the UK by William Rucker. Michael Grayer heads the London debt advisory business, while Richard Stables is European head and co-global head of restructuring. Patrick Long leads the real estate team in London.
In 2009, the group provided debt advice for the £1.7bn restructuring of Alternative Hotel Group – a debt-for-equity swap agreed between Richard Balfour-Lynn’s company and Lloyds Banking Group – as well as the €5bn restructuring of Spanish real estate group Inmobilaria Colonial’s debt.
It also managed Canary Wharf Group’s 2009 move to take advantage of the beleaguered debt markets to buy back nearly £120m of its outstanding CMBS bonds.