The Highstreet consortium, which is the landlord of department store chain Karstadt, has told its bondholders to accept lower rents from the chain or face further losses in a vacancy scenario. The advice follows the successful bid of investor Nicolas Berggruen for the operations of Karstadt in June. Berggruen has made his bid conditional on lower rents in order to give the department store chain more financial flexibility. Bondholders have been urged to accept a further 18.3% reduction in rents between 2010 and 2014. In February, bondholders had already accepted lower rents of €606m for the next four years and agreed to extend the maturity of the loan by three years. Now, the bondholders have been asked to agree to rents of €495m until 2014. Lower rents will result in the chain’s loan-to-value ballooning to 85% in 2014 from 75% earlier, but the LTV covenant will be waived until 2013. The Highstreet consortium believes that the rent reductions will help to stabilise Karstadt’s operations. Cushman & Wakefield valued the property portfolio at €1.41bn in a going-concern scenario, €158m lower than a December valuation, as a result of the proposed reduced rents. If the bondholders reject the rent reductions, the stores will become vacant and difficult to sell, the Highstreet consortium warned. “The market value of the Highstreet portfolio continues to be highly dependent on what happens with Karstadt,” according to documents provided to bondholders. Cushman & Wakefield has further lowered the value in the case of a total liquidation scenario, to €650m from €713m in February and €1.23bn in December 2008. The Highstreet consortium warned that total recoveries for the bondholders could fall further owing to servicing/special servicing and liquidation costs. The documents do not discuss any other scenarios, such as an acquisition of the stores by rival Kaufhof, which has repeatedly expressed interest in Karstadt. Holders of the €780m in class-A notes are to vote on the proposals on 2 September.
The Highstreet consortium, which is the landlord of department store chain Karstadt, has told its bondholders to accept lower rents from the chain or face further losses in a vacancy scenario.
The advice follows the successful bid of investor Nicolas Berggruen for the operations of Karstadt in June. Berggruen has made his bid conditional on lower rents in order to give the department store chain more financial flexibility.
Bondholders have been urged to accept a further 18.3% reduction in rents between 2010 and 2014. In February, bondholders had already accepted lower rents of €606m for the next four years and agreed to extend the maturity of the loan by three years. Now, the bondholders have been asked to agree to rents of €495m until 2014. Lower rents will result in the chain’s loan-to-value ballooning to 85% in 2014 from 75% earlier, but the LTV covenant will be waived until 2013.
The Highstreet consortium believes that the rent reductions will help to stabilise Karstadt’s operations. Cushman & Wakefield valued the property portfolio at €1.41bn in a going-concern scenario, €158m lower than a December valuation, as a result of the proposed reduced rents.
If the bondholders reject the rent reductions, the stores will become vacant and difficult to sell, the Highstreet consortium warned.
“The market value of the Highstreet portfolio continues to be highly dependent on what happens with Karstadt,” according to documents provided to bondholders.
Cushman & Wakefield has further lowered the value in the case of a total liquidation scenario, to €650m from €713m in February and €1.23bn in December 2008. The Highstreet consortium warned that total recoveries for the bondholders could fall further owing to servicing/special servicing and liquidation costs.
The documents do not discuss any other scenarios, such as an acquisition of the stores by rival Kaufhof, which has repeatedly expressed interest in Karstadt.
Holders of the €780m in class-A notes are to vote on the proposals on 2 September.
