London & Regional has not been granted the three-month extension it sought for the LoRDS securitisation of five UK office properties, as only 70% of class A noteholders are accounted for, when the consent of 75% is required. London & Regional and its advisers AgFe and Reed Smith have urged the 30% of ‘missing’ noteholders to come forward.
The sponsor has until at least 20 November to work towards its business plan for the single-borrower agency deal, as the ad-hoc group of noteholders representing the majority of A and B classes has agreed not to take action before then.
If 25% or more of noteholders vote against an extension, it will tip the assets into receivership. But this is thought unlikely – unless investors have been buying the bonds with a view to forcing a default and a sale of the portfolio.
There is little if any equity left in the deal, but L&R could put in more collateral or a one-off cash injection, deleverage the deal, or increase amortisation. In return for an extension, a higher margin would be applied to the notes and prepayment would also be likely.
L&R’s intermediate business plan includes a renewal of the lease on Trinity Bridge House in Manchester, and a refurbishment and re-letting of 2 St Georges Court in London. Fitch Ratings noted recently that were this to lead to a staged sale of the £284m portfolio, “the borrower’s business plan provides a credible platform for a staged reduction in leverage”.
Securing new debt would be tough at its loan-to-value level of just over 80% for the £207m securitised loan. The £90m B note attached to the portfolio could also cause a problem if the entire structure needs to be refinanced, although it could be partially written down as part of a restructuring. There is also a swap expiring in 2022 with a break cost of £45m that needs to be repaid before noteholders receive any payment.
The deal, which matured on 1 October, has no special servicer, although the ad-hoc group’s advisers, Cairn Capital and Sidley Austin, agreed with L&R’s advisors to sell 68 King William Street for around £65m, to Saudi Arabian fund Manafea. As a result, noteholders will be repaid £56.6m at January’s next interest payment date.