Business | Property
Halabi property firms fail to prevent default on 1.15b pound commercial bonds
Notes breached covenants because the properties halved in value.
- Bloomberg
- Published: 23:51 July 3, 2009
London: Investor Simon Halabi's real-estate companies failed to remedy a default on £1.15 billion (Dh6.91 billion) of commercial mortgage bonds at a time when, according to Fitch Ratings, "pretty much" all such European deals would breach loan-to-value conditions if they were tested.
Halabi's companies had until the close of business Thursday to stave off a default on bonds that repackage loans to nine London properties including JPMorgan Chase & Co's offices at 125 London Wall and 60 Victoria Embankment, according to debt administrator Hatfield Philips International Ltd. The notes, sold by White Tower 2006-3 Plc, defaulted on June 19 after they breached covenants because the properties halved in value.
"With capital values having fallen on average by 43 per cent, pretty much any loan that has a loan-to-value covenant if tested today would be in breach," said Andrew Currie, head of Europe commercial mortgage-backed securities at Fitch Ratings in London. Most servicers of commercial mortgage bonds haven't tested these conditions, "storing up trouble" for the future, he said before yesterday's announcement.
White Tower is the largest commercial mortgage bond sold by a single borrower to default this year in Britain, which is Eur-ope's largest market and accounts for about 50 per cent of issuance, according to Fitch. Banks that financed a real-estate buying spree at the top of the market are weighed down with about £230 billion of commercial property loans, data compiled by De Montford University show, making them unwilling to refinance existing deals when they come due.
Syrian-born Halabi started as a director of real estate investment company Property Trust in the 1980s and has been referred to as a billionaire by Forbes magazine.
He was among the investors who benefited from the property boom that was fuelled by the growth of securitisation.
Halabi's assets include the Naval and Military Club on London's Piccadilly, and Mentmore Towers, the former home of Baron Mayer de Rothschild in Buckinghamshire, England. He was one of the original backers of the planned London skyscraper called the Shard, before selling his stake last year.
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