Company in trouble after £810m bridging loan runs out

Company in trouble after £810m bridging loan runs out




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Struggling Spanish property group Metrovacesa, which bought HSBC’s global headquarters in Canary Wharf for £1.1 billion in April 2007, are now offering HSBC the chance to buy Britain’s most expensive building back at a discount after failing to repay an £810 million bridging loan that expired last Thursday. 

Metrovacesa wants the bank to take the 690ft tower back for just £838 million; almost £170 million less than what they sold it for 18 months ago.

 

The situation has now reached a critical stage, with HSBC and Metrovacesa locked in negotiations. HSBC have only confirmed that they provided the Spanish company with a bridging facility of £810 million towards the £1.09 billion price of 8 Canada Square, their former base, and are in ongoing talks with Metrovacesa.

 

Metrovacesa is desperately trying to avoid going into administration after plunging house prices and market turbulence have resulted in the company being weighed down with £5.9 billion of debt. They have sold almost £544 million of property this year to generate cash.

 

The £838 million asking price is a sad reflection of the 23% decline in capital values since the peak of the market in June 2007, and a 24% decline in the value of the skyscraper since April of this year.

 

Various analysts have said that a sale would be better than repossession of the tower; however some remain unconvinced that HSBC will accept the offer price. “I would bid a lot less than that for the building,” one analyst commented. “The consensus is now 45% off – so it looks like £650 million. However, HSBC would then have to pursue them for the rest of the loan, so a compromise looks the best option.”

 

HSBC sold their headquarters – which has a gym occupying an entire floor, dining rooms, shops and a medical centre – to exploit the value of its property portfolio. Metrovacesa bought it at the peak of the 2007 property bubble.

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