Sole financial adviser to a consortium of equity investors on potential restructuring options in respect of the landmark Plantation Place office building in the City of London.
Plantation Place was secured by a senior loan of £435m which had been securitised in the REC Plantation Place CMBS transaction. Following the global financial crisis the loan was in breach of its LTV covenant and activist investors had acquired bonds at a discount, and were pushing the servicer, Rothschild, to enforce and sell the building which would have resulted in potentially part of the debt and all the equity being written off. The underlying building and tenants were of very high quality but refinancing was not possible due to market conditions. A previous attempt to find a solution on behalf of the equity investors through a large global restructuring firm had failed. The equity sponsors had invested significant equity in the transaction and the lead investor, a listed fund, had written its equity down to zero. The equity sponsors turned to Brookland to assist them.
- We proposed a light touch solution that removed the threat of enforcement through a waiver of the LTV covenant, to allow the borrower time to complete a controlled sales process ensuring all creditors, including the junior lender received a 100% recovery and the sponsors recovered some of their equity. Due to certain transaction issues the waiver of the LTV covenant required approval of all classes of noteholders through an EGM.
- We identified 93% of all noteholders and the junior lender which was not easy at the time. We then spent time taking noteholders through the merits of the proposal to build an appropriate consensus. At least 75% of each class of noteholders agreed to support the waiver resolution (which was the voting threshold). Days before the EGM an activist investor acquired a blocking stake in one of the smallest tranches and blocked the waiver resolution at the EGM which lead to further deadlock.
- To neutralize the threat from the activist investor, we proposed an innovative idea to replace the formal waiver with an informal but effective solution. We arranged for a simple majority of all classes of noteholders and the junior lender to issue forbearance notices stating that they would not support enforcement or a scheme of arrangement and would allow a suitable period of time to allow for an orderly sales process to be completed.
- Our approach repaired damaged relationships between the stakeholders and creditors and built significant support through a fully consensual approach that leveraged our relationships with the noteholders, the junior lender and the servicer. We also acted as Consent Solicitation Agent for the issuer.
- Our strategy was successful. Values recovered and the building was eventually sold in 2012 for a much higher price (equivalent to circa £500m).