Grant Thornton applied for a freezing order over Propinvest Group Limited and its subsidiary companies on Monday on behalf of creditors DNB Bank AS and Bank of Scotland, in an effort to wrest control of Glenn Maud’s property empire, CoStar News can reveal.
The application follows the appointment of Grant Thornton’s Jamie Toynton and Malcolm Shierson as joint administrators over a Propinvest subsidiary company which owns 64 predominantly retail properties in Sweden and Finland.
Maud has appointed Berwin Leighton Paisner in the UK and Carey Olsen in Guernsey as legal counsel to vigorously contest a lgeal order which he described as “malicious and aimed at embarrassing the parties involved”.
A Propinvest statement continued: “We are shocked and disappointed at the approach taken by Grant Thornton.
“No prior notice was given before the order was served, in spite of PGL directors having cooperated fully with Grant Thornton since they were appointed as administrators almost 12 months ago and PGL has had no communication from them whatsoever for at least the past six months.”
The application of the freezing order over Propinvest and its subsidiaries’ assets was lodged by Grant Thornton 24 hours before Deloitte’s Phil Bowers, Neville Kahn and Rick Garrard were appointed administrators over Propinvest’s Gemini securitised portfolio.
The timing of this is significant and intertwined with the recent fate of Propinvest’s enforced securitised Gemini portfolio as it allows Grant Thornton – if the freezing order application is upheld after Propinvest’s defence is heard – to claim around £3m in a surplus account held by Eagle Holdings, the holding company of Gemini, the special purpose vehicle which owns the 34-strong Gemini portfolio.
“We are concerned that the primary objective in Grant Thornton obtaining the order on Tuesday, one day before the Gemini portfolio companies were placed into administration in Guernsey, is to try to seize cash funds in excess of £3m held in the parent company of the Gemini portfolio, the monies of which are properly the property of those companies and their creditors,” Propinvest’s statement continued.
CBRE Loan Servicing enforced against the securitised UK secondary Gemini portfolio on 7 August, which GVA valued at £437.75m in March against an outstanding CMBS loan of £850.36m.
The decline in value of the secondary portfolio is exacerbated by the Gemini securitisation’s long-dated interest rate swap agreed with Barclays Capital, the investment bank which issued the Gemini CMBS, which to crystallise an early break would cost bondholders £287.2m, according to Chatham Financial, as at 17 July.
Enforcing against a securitised loan automatically triggers a break in the interest rate swap contract which normally would subject bondholders to the cost. However, CBRE Loan Servicing brokered an agreement with Barclays which agreed to waive the automatic swap contract termination in exchange for an agreed managed paydown of liabilities.
These liabilities always rank ahead of bondholders recoveries.
Maud’s plans were nulled by CBRE Loan Servicing’s 7 August loan acceleration, who had been trying to engineer the purchase of the Gemini CMBS loan from the existing bondholders with private equity firm KKR.
Propinvest’s strategy was for KKR to buy the loan for around £370m, with a further £80m set aside to maintain the interest rate swap costs. KKR would have then bought the Gemini holding company, Eagle Holdings, for a nominal £1, and maintain the existing structure without breaking the interest rate swap, while also maintaining the blended circa 50 basis points margin across the bonds which still have nearly four years to run.
The KKR and Propinvest offer was rejected by bondholders on the basis that it would “not maximise recoveries for noteholders on a net present value basis”.