New proposal would see bondholders 'get the lot'

Friday 15th June 2001

METROPOLIS: 'A couple of recent sales'

By Campbell McIlroy

A new proposal being drafted by Metropolis developer Andrew Krukziener promises out-of-pocket bondholders they will get all the proceeds from the selldown of apartments in the building.

The fine detail of the proposal is unclear but both the trustee and Mr Krukziener have confirmed bondholders will receive all the proceeds from sales of Metropolis units up to the full amount they are owed.

"The proposal, which will come out next week, will in simple terms give the full net sale proceeds from the development to the bondholders," Mr Krukziener said.

This effectively prevents Mr Krukziener from recovering any funds from the development until the bondholders are repaid in full or all the units are sold.

Tower Trust general manager Glenn Clark said a new valuation showed that based on a quick orderly sale there was sufficient equity to repay the principal with some of the interest paid.

The question of how much interest depends on how long the sale process takes.

Banking sources told The National Business Review the amount owed to the ANZ is more than originally thought.

It is understood the ANZ's first mortgage totals $15.5 million, with bondholders owed $21 million in principal and $4.4 million in interest up to the default date of May 20.

This takes the total outstanding on the development to $40.9 million, with penalty interest of 19% accruing on the bonds until - and unless - the bondholders accept the new proposal.

It is not clear whether the penalty interest rate will continue to accrue or whether a new interest rate has been negotiated.

Money Managers general manager Doug Somers-Edgar appears to have been preparing investors for the worst, with predictions of interest rates eroding the bondholders position.

Industry observers have been at a loss to explain Mr Somers-Edgar's actions and why he would not want to be putting a positive spin on the proposal.

Another factor that may affect the amount paid out to bondholders is the disposal costs.

Real estate agents' commissions range from 3.5% to 4.5%.

Mr Clark said the valuation gave a realistic expectation of a return to bondholders after taking away expenses but the returns would be affected by how long the sales process dragged out.

Mr Krukziener said there had been a dramatic improvement in the market over the past few months but media attention was not helping the Metropolis cause.

Despite this he said sales were going well, with a couple of sales in the past few weeks.

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