White Tower note holders in the money after City disposal

Most investors in CMBS will be repaid from Aviva Tower sale proceeds

The £288.2m sale of Aviva Tower will result in a total of more than £1.1bn being repaid to note holders in the £1.15bn White Tower CMBS. Proceeds from the sale of the City landmark, the last asset in the White Tower portfolio to be sold, will be paid sequentially, so all note holders who invested in the deal, apart from the class E tranche, will be repaid in full. The class A note holders were paid off in full when eight of the nine office properties backing White Tower were sold to Carlyle Group, WELPUT and Hammerson in separate deals last year.

At that time, the vast majority of the £171.5m class B tranche was also repaid. There has been some amortisation from surplus rental income following the expiry of  the swap underlying the deal, thanks to there being no other hedging in place and the loan being floating rate. Now the remaining £365,000 class B tranche will be repaid, as will note holders in the £116m class C tranche and £116m class D tranche.

The £68m class E tranche, which was trading at just a  few pence when CBRE Loan Servicing took over the deal from Hatfield Philips in August 2009, won’t be fully covered. However, class E note holders could still “reasonably expect a significant payout” after certain costs and provisions have been deducted, said a source close to the work-out.

For this group, the proceeds are likely to “drip out as matters become clearer”, he added. There will be nothing left for the junior lender, Caisse de Dépôt et Placement du Québec, because the junior loan beneath the securitisation has been wiped out. The tower was put on the market for £284m in February and is thought to have been sold to a wealthy individual investor from Malaysia at a net initial yield of 5.4%.

Terms for the sale have been agreed and the deal is scheduled to close ahead of the July interest payment date. Société Générale securitised the debt it provided for Simon Halabi’s Protractor portfolio in 2006, which was valued at £1.8bn at the time. In June 2009 the portfolio’s  value was downgraded by almost half, to £929m, which caused the loan to default just one month later.