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Morgan Stanley-backed vehicle risks breaching banking covenants

Songbird Estates, a property company backed by Morgan Stanley Real Estate Funds, unveiled £1.8bn annual losses today and said there was a ‘material risk’ of breaching banking covenants within the next 12 months. It has appointed UK bank Rothschild to advise on funding options.

Songbird Estates, the majority owner of London’s Canary Wharf Group, has appointed Rothschild bank to work out long-term financing arrangements as the company risks breaching banking covenants within the next 12 months.

Unveiling annual pre-tax losses of £1.8 billion against £182 million profits last year, the quoted London real estate company – whose equity owners include Morgan Stanley Real Estate Funds – said it had an £880 million loan repayable in May 2010 which needed to be refinanced.

Songbird said that while it was still in compliance with all of its loan covenants, it had appointed UK bank Rothschild to advise it on putting in place a “more appropriate long-term financial framework”.

Though the company believes it will meet its next banking covenant test due by the middle of May, it warned that there was a “material risk” that it would subsequently break its financial covenants within a year.

The value of Songbird’s property portfolio has fallen 26 percent in the past 12 months to £5billion, while its investment portfolio has declined by 28 percent.

Canary Wharf Group is a property company focussed on London Docklands area where Bank of America, Morgan Stanley, Citi, HSBC, and Barclays have HQ offices.

It was taken over by Morgan Stanley and New York's Glick family in 2004.