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The debt-ridden owner of Canary Wharf today secured its future with hundreds of millions of pounds of investment from sovereign wealth funds in Qatar and China.
Songbird Estates, which controls the majority of the Docklands development, struck a deal to repay its £880million loan from Citigroup which threatened to cripple the firm.
The deal was funded mainly by two sovereign wealth funds - current shareholder Qatar Holding and new investor China Investment Corporation.
It could leave the pair owning more than half of Songbird, which took the loan from Citi in early 2007 just before the onset of the credit crunch and crash in property prices.
Just months ago Songbird warned there was a serious risk that it would breach the covenants on the loan - raising fears about its future and that of Canary Wharf itself.
Songbird chairman David Pritchard said today: "This deal secures the future of Songbird. It is a strong vote of confidence in Canary Wharf and its future prospects."
Songbird secured a 5% or £44 million discount with Citi meaning it will repay £836 million by 20 October.
It put down a £150 million deposit today. The repayment will be financed by a fundraising involving Qatar, CIC and current shareholders including Morgan Stanley Real Estate Funds and GF Investments. Qatar, which already owns 14% of Songbird, and CIC will plough some £275 million into Songbird by snapping up preference shares. Another £550 million or so will be raised by selling new ordinary shares in Songbird for just 1p each. The shares, listed on AIM, were down ¾p today at 33p. Full details of the share issue will be published with Songbird results next month.
Qatar and MSREF will also inject at least £80 million to cover their 14% holdings and GF will plough in double that to keep its 28% holding. Along with CIC, they have underwritten the share issue and could take bigger stakes.
UK property company British Land, which holds 17% of the shares, does not plan to buy into the fundraising as it tackles its own problems. It is desperately trying to cut its debts and recently sold a 50% stake in the Meadowhall shopping centre in Sheffield for £588 million and raised another £740million from shareholders.
It now plans to sell half its stake in the Broadgate office complex in the City.
Curse of Canary
Canary Wharf traces its roots back to the Thatcher administration of the early Eighties when American banker the late Michael Von Clemm and property investor G Ware Travelstead had the idea of copying the Boston docks redevelopment in London's derelict Docklands.
Although new buildings have been going up since, it has not been without a litany of corporate collapses and refinancings. Prospective tenants CSFB and Morgan Stanley pulled out of the development consortium in 1986, effectively killing it off.
Then Canadian developers Olympia and York took up the reins only to collapse in the recession of the Nineties. O&Y's backers rescued the project, creating a new company, Canary Wharf Group. In 2004, this was taken over by another consortium, which calls itself Songbird Estates.
