The owner of Canary Wharf today revealed it has bought back nearly £120 million of its debt for as little as 21p in the pound.

Canary Wharf Finance II, a unit set up by Songbird Estates to finance its investment in the Docklands development, repurchased £119.8 million of securitised debt from bondholders.

It paid just £35.5 million to buy back the notes with the price varying between 21.6p in the pound, 30.3p in the pound and 46.8p in the pound.

The substantial discount highlights the lack of faith investors have in corporate debt and the property market.

There is very little liquidity in the market for such debt and prices have plunged as investors shun hard-to-value securities amid the fallout from the subprime crisis.

Canary Wharf said the deal represented “an attractive investment opportunity” and reduced the company's debt. It is expected to keep the notes rather than cancel them, effectively paying interest to itself.

The 30-year notes were issued in April 2007, close to the peak of Britain's commercial property market.

It follows a similar move by buyout firm Terra Firma Capital Partners which recently moved to profit from the credit-market turmoil by buying up its own debt at depressed prices.

Hugh Osmond, head of zombie fund Pearl Group, is considering an offer to buy back bonds at just 121/2p in the pound — around half the price of the Canary Wharf deal.

Songbird, which owns 16 of the 30 buildings at Canary Wharf, last month admitted it has “minimal headroom” on its £880 million loan from Citigroup after the value of its properties lost £1.8 billion last year.

It is now in talks over how to overcome the debt burden and has appointed Rothschild to advise on its options.