Property group's future hangs in the balance

Property group's future hangs in the balance



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Financial woes have left a Liverpool-based property group's long-term future highly uncertain.

Property developer Spencer Commercial Property (SCP) faces a “material uncertainty” over its ability to continue trading, after it failed to refinance its £200 million bank facilities.

The group breached its banking covenants last year as plummeting property prices saw nearly £40 million wiped off its property portfolio, the Liverpool Daily Post reports.
The company is now trying to renegotiate its loan facilities, which expired on December 31 last year.
In the auditor’s report at Companies House last week, auditor Anthony Farnworth, of Deloitte, said: “Should no agreement be reached with its bankers, the loan could be called in, which would be likely to result in the realisation of assets below book values.
“These conditions indicate the existence of a material uncertainty which may cast significant doubt about the company’s ability to continue as a going concern.”
For the first for 20 months, SCPs accounts showed a pre-tax loss of £3.5 million for the year ending March 2010, which was caused by a £7.3 million charge from the cancellation of a £60 million interest rate swap.
This, along with other interest charges, meant that 94 per cent of its £15.7 million turnover went on interest payments.
Net assets stood at £2.9 million at the end of the year while creditors due within one year reached £193.2 million, because of the ongoing issue of its bank facilities.
According to the Liverpool Daily Post, SCP said: “While the bank continues to fund the group at the previous levels, negotiations remain ongoing with the group’s bankers, such that the directors anticipate that new facilities will be finalised during 2011 appropriate to secure the group’s funding requirements for the medium term.
“The directors continue to work on and finalise a five-year strategic plan to be agreed by the bank that will form the basis for the new facility, the specific covenants and the repayment profile expected.
The company is maintaining a positive outlook and is drawing up a five-year plan to make a persuasive case for refinancing after its portfolio was revalued at £180.1 million.
SCP continued: “The group’s forecast and projections, taking into account reasonably possible changes in trading performances, show that the group should be able to operate within the level of the proposed facilities.
“On the basis of these forecasts, the ongoing negotiations, and after making enquiries, the directors have a reasonable expectation that the company will have adequate resources to continue in operational existence for the foreseeable future.”
Jim Spencer, former chairman of SCP, stepped down from the board in September last year after over 50 years at the helm. SCP started as the family scrap metal business before it focused on property in the 1980s.

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