REO debts may be unsustainable in financial climate, say auditors
Realisation of the controversial £1billion plans for London’s Battersea Power Station may prove to be a pipe dream after auditors advised the company that owns the site, REO (a subsidiary of Treasury Holdings), they may not be able to sustain debts of £1.621 billion in the current financial climate. The news follows the publishing of the firm’s half-year accounts which state that due to the reliance on UK banks, there could be a ‘material adverse impact on the value of (REO’s) property portfolio, our shareholders equity and as a consequence on our ability to obtain longer term debt or equity financing required to meet our longer term financing and liquidity requirements beyond 2010.’
Battersea is the firm’s most valuable UK property and has been the subject of much controversy from both local pressure groups and architectural critics. Several plans have been submitted, most famously a design by Rafael Viñoly which would have transformed the 38 acre site into an unmissable mixed use location complete with 300m high glass chimney. The plans were steadfastly objected to by the Mayor of London and the design was dropped for a rather tame-in-comparison design by the Uruguayan architect involving plentiful green roofs and an encasement of residential towers. While these plans are still on the table the news of the accounts threatens their security.
On current standing, REO’s future relies heavily on a series of temperamental assumptions as to whether bank financing will be rolled over and current deals will remain in place but the company admit that the next year will be testing stating that, “Failure to deliver on the forecast assumptions may cast significant doubt on the ability of the Company to continue as a going concern and it may therefore be unable to realise its assets and discharge its liabilities in the normal course of business.” This being the case, the company may be forced to shed its assets.