Property firm to make £120k in administration

Property firm to make £120k in administration


A Plymouth-based property firm which collapsed as a result of rising repayments on a £57 million RBS interest swap loan will have made £120,000 six months after it entered into administration, Western Morning News reported.

A report assembled by creditors of London and Westcountry Estates Ltd (LWE) shows that the business, which still owns 27 business parks in south-west England with around 300 tenants, is expected, after costs, to make £120,000 across quarters two and three.

The industrial property firm went into administration in March 2012 after taking out a £57 million interest swap loan from The Royal Bank of Scotland (RBS) in 2008.

The sum advanced was used to finance the acquisition of several business parks as part of the company’s portfolio of commercial properties, four of which have since been sold by administrators for around £4.8 million.

Such interest-swap deals were sold to protect businesses such as LWE against sudden increases in interest rates, but actually lead to the property firm repaying the loan at pre-recessionary rates as the base rate fell to an all-time low of 0.5 per cent.

Repayments started at 4 per cent before they quickly rose to 6.4 per cent. It was only after interest rates hit 7.5 per cent last August that the company was no longer able to repay their loan. 

Mike Hockin, LWE’s co-founder, was initially retained by administrators Ernst & Young to help run the business but has since been made redundant along with his son Matthew. Another son, James, remains involved with the business.

Mr Hockin previously alleged that RBS gave his company only 24 hours to sign the loan agreement and that he had the impression that the deal had a three-year break clause that would allow either party to exit the agreement.

However, when his company tried to terminate the loan after three years, Hockin asserts that he was told that only RBS could activate the break clause and that it would cost LWE £11 million to exit the arrangement.

In September, the FSA reported that around 40,000 interest rate swaps might have been mis-sold to small businesses, prompting Barclays, HSCB and RBS to set aside £630 million to compensate customers.

LWE have already paid £4.27 million to Isobel Assetco Ltd, a company owned by US venture capitalists Blackstone and which bought the Plymouth firm’s loan as part of a larger book from RBS.

Administrators Chris Marsden and Alan Bloom recently published a creditors’ report which states that a ‘piecemeal’ approach is being taken to dispose of the remaining commercial sites.

Four industrial estates currently owned by the company are on the market, with all properties set to be sold by the end of September 2013.

The BBC reported that, at the time that LWE went into administration, Mr Marsden said: “It is our intention to continue to trade London & Westcountry Estates Limited as we seek offers for the sale of the business and assets.

“During this period, we are committed to ensuring continuity of service for the tenants of the company’s properties.”

Speaking about the company’s projected turnover, Mr Hockin said: "I believe it proves the point that there's nothing wrong with the business. Even though they have sold off £4.5 million worth of property, the rent roll has gone up. The rent roll has taken up the slack that has been lost on sales – it's a very good business."

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