RBS to negotiate with creditors as portfolio falls 18% in year
Private property group Dunedin has breached the banking covenants on a loan that it used to refinance a large shed portfolio.
The £473m loan is secured against Dunedin’s Industrious portfolio of 120 industrial sites across the UK, which it unsuccessfully tried to sell last summer.
Royal Bank of Scotland securitised the loan in October 2006 by selling commercial mortgage-backed securities bonds to investors, which helped lower Dunedin’s interest payments.
The Industrious portfolio was valued at £631m in September last year, which took its loan-to-value to 74.9%. Dunedin had agreed a 75% LTV covenant with RBS.
As at 30 June this year, the portfolio was valued 17.5% lower at £521m, which implies an LTV ratio of 90.7%.
The issuer of the bonds, called Epic (Industrious), said in a statement this week that RBS was to start discussions between itself and the bondholders.
Around half of the Industrious portfolio was bought from Brixton in 2006. ING and Warner Estate were among the prospective bidders for the properties in June last year, before Dunedin scrapped the sale.
Moody’s, the rating agency, this week warned that it was seeing a rising number of LTV covenant breaches in European CMBS loans due to declining property values, as more revaluations were carried out.
“We expect the number of loans with an LTV covenant breach to increase over the next couple of quarters,” said the agency in its quarterly Surveillance Review.
Loan is secured against 120 industrial sites across the UK
