Property investment fund manager New Star is in crisis talks with banks over its reported debt of £230 million ($375 million; €291 million).
New Star’s shares were suspended recently after hitting a low of just 14 pence, a 92 percent decline in value this year.
The firm said it was in “advanced and constructive discussions” with its banks, including Lloyds TSB, Royal Bank of Scotland, HBOS and HSBC. Speculation is mounting that the talks will result in a debt for equity trade off between New Star and its banking syndicate.
Analysts suggest that New Star’s debt problems have been putting off potential buyers, including Aberdeen Asset Management.
The open-ended property fund, run by former Citi Property Investors chief investment officer for core and core-plus real estate funds Stuart Webster, had raised £555 million as of June this year, according to the firm’s website.
Open-ended real estate funds have been hit in the wake of the credit crunch, with Aviva Investors temporarily suspending dealings in its European Property Fund last month. The suspension followed moves by German open-ended funds KanAM and Morgan Stanley Real Estate to halt redemptions from its funds after mass withdrawals.