Morgan Stanley Real Estate Funds has agreed to buy additional shares in the owner of London’s Canary Wharf in a bid to prevent Songbird Estates from breaching a £880 million (€1 billion; $1.4 billion) loan.
MSREF is one of four investors that have pledged to back the new share issue. Qatar Holding, China Investment Corporation and Simon Glick’s GF Investments II, will also take part in the share issue, Songbird said in a statement.
Songbird, which owns 60.8pc of Canary Wharf Group, risked breaching loan-to-value covenants on the Citi senior loan. The company said it had negotiated to repay the principal and interest amount at a 5 percent discount, equivalent to around £836m.
If Songbird is unable to complete the share issue, MSREF, Qatar, CIC and Glick will have the opportunity to buy the senior debt at the same discount. Together the four investors own a 72.2 percent stake in Songbird.
Had the deal not been agreed, the most likely outcome would have been the administration and liquidation of Songbird.
David Pritchard, Songbird chairman, said: “It is a strong vote of confidence in Canary Wharf and its future prospects by two substantial long term institutional investors and by existing shareholders.” He added that Canary Wharf and Songbird would be “financially transformed” by the deal.
Qatar Holding, MSREF, Glick and CIC will also deposit £150m into an account as an initial payment as part of the equity commitment.
Songbird was set up by a MSREF-led consortium of investors, including Glick, Goldman Sachs and Prince Alwaleed Bin Talal, in 2004 after it successfully bid £1.7 billion for the London docklands district in 2004.