Kentish Property, which borrowed big to build housing in London’s Docklands, is on the financial ropes.
Two of its biggest lenders, Halifax Building Society and Security Pacific National Bank, have appointed receivers to deal with Burrell’s Wharf and Bow Quarter, the schemes which they were funding. And two other creditors — Property Lending Trust and First National Commercial Bank — have also put receivers into three of Kentish’s subsidiaries.
The Halifax, which last year provided £20m for a 343-apartment complex at Burrell’s Wharf, says that it will provide further funds “so that a revised scheme can be completed as a quality development”.
Because its loan was a limited-recourse one, the Halifax’s only comfort is that the project, in its current state, is thought to be worth between £3m and £10m. However, it may have to spend as much as £10m more to complete the scheme.
“The society has considerable experience in providing development finance and it is confident that the final position of Burrell’s Wharf will be an acceptable one,” says chief executive Jim Birrell. “While we will make full provision for any estimated loss arising from Burrell’s Wharf, in accordance with strictest accounting standards, our financial strength means that we can take a more long-term view than most.”
Security Pacific, which lent £24m for 638 flats and 19 houses at Bow Quarter, also has to decide whether to put more money into the scheme.
The original loan was syndicated out to six other banks, who will have to agree.
Kentish’s problems stem from its high borrowings and concentration on the Docklands market, where demand for housing has collapsed. Earlier this week, Kentish failed in its bid to get the courts to appoint an administrator.
This move, an arrangement under the Insolvency Act 1986, would have given it some protection from its creditors. However, the Halifax and other lenders had already moved to put in receivers and the judge refused Kentish’s request.
