Wharf buoyed by AIG bail-out
THE US Government's decision to bail out insurer AIG looks to be good news for Canary Wharf Group.
The estate landlord are due to receive rent payments on Lehman Brothers' Bank Street headquarters for four years as part of a securitisation policy with the company.
But AIG's own floundering finances raised fears about its ability to cover the deal.
The Federal Reserve's decision to seize control of the insurer in a £47billion rescue deal on Wednesday should allow CWG to breathe easier.
Lehman Brothers agreed to pay £41million a year for 30 years for around one million sq ft at 25 Bank Street, which opened in 2003.
It occupies 875,000 square feet, and sublets the remaining 148,000.
The policy was designed to allow CWG four years to find a replacement tenant in the event of a default by Lehman Brothers.
Due to AIG's falling credit rating, CWG could have been forced to call on the company to post collateral or find another backer to guarantee its agreement. Many experts predicted the collapse of the insurer would have an even wider impact than Lehman's demise, as it provided cover for several of the world's leading institutions.
As part of the securitisation package, CWG can also fall back on a £300million fund with Lloyds Bank plc in the event of cash-flow problems.
Lehman Brothers' decision to file for Chapter 11 bankruptcy on Monday means it is currently in the hands of administrators PricewaterhouseCoopers and has still not technically defaulted on its rent in Canary Wharf.
A statement from CWG's parent company Songbird on Tuesday revealed discussions with the company would start shortly.
For more on the collapse of Lehman Brothers click here.
Older/Newer
« Bunnies remember Playboy past | Haye to hit the O2 in November »
Leave a comment