Battle for Castle Market: Kennedy Wilson/Värde win after loan enforced

Kennedy Wilson and Värde Partners are at finally set to win the fiercely-contested 16-strong Castle Market Dublin office portfolio, after special servicer Hypothekenbank Frankfurt began loan enforcement proceedings this afternoon ahead of a sale to the original joint venture bidders, staving off a concerted 11th-hour bid by Northwood Investors.

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In probably the most protracted battle for control over a CMBS portfolio since the Uni-Invest tug of war in April last year, Hypothekenbank Frankfurt has instructed Ernst & Young’s David Hughes and Luke Charleton as joint receivers over the Castle Market portfolio which will now be directly sold to Kennedy Wilson and Värde Partners.

Hypothekenbank Frankfurt’s decision followed a comprehensive canvassing of all noteholders in the Opera Finance (CMH) CMBS to discuss: the existing Kennedy Wilson and Värde proposal in light of the failed EGM, Northwood’s alternative CMBS restructuring proposal and potential undeclared alternative solutions.

Feedback was split, consistent with where value breaks in the Opera Finance (CMH) CMBS: the majority of class As and Bs urged the special servicer to reject the Northwood proposal and to accelerate the loan ahead of a portfolio sale to Kennedy Wilson and Värde Partners, while the majority of Ds favoured Northwood’s proposal.

The decision by Hypothekenbank Frankfurt, advised by Cairn Capital, was not straightforward. In economic terms across the CMBS, Northwood’s proposal was superior – indeed had final proposal been offered in early May, during the restricted negotiations, its offer would have beaten Kennedy’s.

Northwood’s final bid was €311m against Kennedy and Värde’s final bid of €306m.

Possibly the deciding influence in Hypothekenbank Frankfurt’s loan enforcement decision today was in Kennedy and Värde’s joint acquisition of a more than 25% stake in the class Bs at the beginning of last week as it established a blocking vote in the senior bonds nullifying Northwood’s ability to secure an endorsement for its CMBS restructuring proposal.

While Hypothekenbank Frankfurt’s statement this lunchtime did not reference the block stake specifically, the special servicer stated: “The high level of opposition to the Northwood proposal from class A noteholders and class B noteholders with holdings of notes well in excess of the amounts necessary to block the Northwood proposal has led the special servicer to conclude that the Northwood proposal is not deliverable in the circumstances.”

This particular CMBS battle, finally, looks to be over.

jwallace@costar.co.uk

About CoStar News

Finance Editor, CoStar News
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