Liverpool skyscraper developers Beetham agree deal with bankers

Jul 9 2008 by Bill Gleeson, Liverpool Daily Post

Beetham founder says: We are in extremely good shape

THE property group behind two of Liverpool’s landmark city centre towers has faced financial difficulties that have forced it to renegotiate the terms of its bank borrowings.

Companies trading under the Beetham name have asked their bankers for more time to repay tens of millions of pounds of debts that in some cases were due in May and June of this year.

Problems have arisen due to the credit crunch and a downturn in the UK housing market. The debt renegotiations come as Beetham’s financial state was highlighed by its auditors, Deloitte & Touche.

The accountancy firm used the auditors’ report, published in the most recent set of accounts, to draw attention to what they described as a material uncertainty which may cast significant doubt about the ability of a number of Beetham companies to continue trading.

ŠBeetham’s developments include the 40-storey West Tower in Liverpool city centre.

It has also built Beetham Tower and the Radisson SAS hotel, on Old Hall Street, and Beetham Plaza, as well as other buildings in the city.

The company has also constructed a 44-storey tower in central Manchester and other developments around the country.Š

In an exclusive interview with the Liverpool Daily Post, the company’s founder, Hugh Frost, said the Beetham companies were capable of trading out of their present difficulties.

Beetham now hopes to service its debts from rental income from lettings instead of selling its portfolio of unsold apartments.

Beetham family companies hold in excess of £300m of debt on their balance sheets. This includes £153m owed on hotel and apartment schemes in Liverpool, Manchester and Birmingham. Beetham-related companies also owe £160m against developments in central London at Blackfriars and The Minories.

As well as rental income, the company hopes to generate additional funds if it wins permission from Whitehall to develop its Blackfriars scheme.

A decision is expected in January. Beetham has recently secured £100m of investment from Russian billionaire investor Sergei Polonsky’s Mirax Group for the Blackfriars scheme, which has helped with the debt restructuring talks.

Debts include £49m owed by Beetham’s hotel development, in Manchester, and £26m owed by hotels in Birmingham and the Radisson SAS hotel building in Liverpool.

Another £12.9m is owed by the Beetham Tower scheme in central Manchester and a residential scheme in Birmingham owes £10m.

The Blackfriars and Minories schemes each owe £80m to the banks.

Debt on the 40-storey West Tower, in Liverpool, was due for review with Anglo Irish Bank in May. The bank has now agreed to look at the issue again in 12 months’ time.

The debt term for the Manchester residential scheme has also been extended for another year, while the Birmingham scheme has secured a five-year extension. The hotel debts have longer terms to run.

Referring to West Tower, Mr Frost said: “Slow sales have meant we have extended those facilities for 12 months and the possibility of extending for five years to allow us to respond to the market for rental rather than pursuing sales.

“The other debts on residential developments in towers in Manchester and Birmingham have been extended on the basis that it is our intention to rent and/or sell in response to market demand.

“Blackfriars’ debt has been completely restructured as a result of the deal we have done with Mirax. Trinity (The Minories) is in the process of being renegotiated.”

Referring to the going concern doubts raised by the auditors’ report, Mr Frost said: “The cash raised from that deal (with Mirax) has enabled us to completely restructure our debts and that process is continuing – including the Russians taking responsibility for 50% of the debt of £80m on Blackfriars.”

Asked whether Beetham companies will be able to satisfy its bankers in 12 months’ time, when some of its debts are due to be repaid, Mr Frost said: “You are asking me to crystal-ball gaze. I think the problems in the property market are here for possibly more than a year.

“I think that’s more a reflection of the banks’ cautiousness and their own problems.

Š “That’s a much wider issue than our problems. It’s banking’s problem. We don’t know what other funding might be available in 12 months’ time.

“The success of our Blackfriars scheme depends on the Secretary of State consenting, which we should know about January next year. It releases sufficient cash to deal with all of our banking problems.

“But it’s prudent not to count those chickens until they are hatched.

“So we rather take the view that, having had successful relationships with our bankers for the last 20 years, we don’t believe they are going to deliberately cause us a problem in 12 months’ time. Relationships must count for something.”

Asked what would happen if the Blackfriars scheme was refused permission by the Secretary of State, Mr Frost said: “Then life is not so easy. We have challenges which we will deal with.

“We are renting residential developments in the provinces. The progress of that rental business will service on-going debt, as does the surplus from the hotel operations.

“You have to look at each project and see it stand up on its own.“If one project is particularly successful, that can carry others that maybe are holding you back.

“Overall, we are in extremely good shape, especially when you look at the market conditions generally and how others are faltering.”

Mr Frost said he was keen to avoid any of his companies going bust.

“We will never let anything go,” he insisted.

“We have the option to use resources generated from other developments to support Liverpool, Manchester or Birmingham. The fact is I am expecting the lenders on those projects to continue to back them in 12 months’ time and if they don’t have the appetite to do so, then I expect other lenders to come back into the market.

“I think 12 months is a reasonable time to allow us to demonstrate that we can carry these residential projects that have become rentals instead of sales.

“We are renting out something like four a week in Liverpool, five last week in Manchester, three in Birmingham. The rental market is quite buoyant, which is very often the way when the sales market is otherwise.”

Asked whether he would invest his own personal resources into the business, Mr Frost said: “In my track record in business, I have never let any company that I have had control of, or any part of, go into receivership or liquidation, and I would like to keep that record.”

billgleeson