Canadian creditors cool on O&Y offer

OLYMPIA & YORK's Canadian parent clung to its hope of retaining control of its vast property holdings yesterday, unveiling a reorganisation plan that would give its creditors a 49 per cent stake in the Toronto-based developer.

That stake could rise to 80 per cent if O&Y were unable to repay its debts after a five-year grace period sought by the company. In the meantime, however, O&Y would retain management control of the 11 Canadian office towers that secure much of its debt, allowing mortgage holders to force their sale only under certain circumstances.

Under the dollars 7.2bn proposal - to be submitted to a Canadian bankruptcy court today - the founding Reichmann family would turn over its 20 per cent stake in O&Y's US arm to the restructured company as its contribution to the plan.

At a news conference, O&Y's president, Gerald Greenwald, insisted once again that O&Y was worth considerably more to its creditors intact than it would be dismembered.

'This is the premise under which discussions are taking place,' he said.

Initial reaction by the 29 lenders to O&Y's Canadian parent was negative, notably among the 11 groups of secured creditors who have already filed motions to 'carve out' from the proceedings the buildings that back up their dollars 1.8bn worth of loans.

Without their support, foreclosure proceedings will begin, unravelling the core of O&Y's holdings.

O&Y's creditors have grown increasingly impatient with the prolonged restructuring process, complaining that legal and other costs are eating into their collateral. But Mr Greenwald said that 'significant progress' had been made in talks with five of the 11 creditor groups, while talks with four others were 'well advanced'.

Resolution of the Canadian bankruptcy is considered essential to the future of the Canary Wharf project in London Docklands - in the hands of administrators since May - and to refinancing hopes for O&Y's US subsidiary, which has so far resisted a bankruptcy filing.