DEVELOPER Spencer Commercial Property faces a “material uncertainty” about its ability to continue trading, after it failed to refinance its £200m bank facilities, LDP Business can reveal.
The Knowsley-based group breached its banking covenants last year as plunging values saw nearly £40m wiped off its property portfolio.
It is now trying to renegotiate its loan facilities, which expired on December 31, 2010.
In the auditor’s report contained in accounts filed at Companies House last week, auditor Anthony Farnworth, of Deloitte, said: “Should no agreement be reached with its bankers, the loan could be called in, which would be likely to result in the realisation of assets below book values.
“These conditions indicate the existence of a material uncertainty which may cast significant doubt about the company’s ability to continue as a going concern.”
The accounts, the first for 20 months, showed a pre-tax loss of £3.5m for the year to March, 2010.
That was caused by a £7.3m charge from the cancellation of a £60m interest rate swap which, along with other interest charges, meant 94% of its £15.7m turnover went on interest payments.
Net assets stood at £2.9m at the year- end while creditors due within one year reached £193.2m, because of the ongoing issue of its bank facilities. Its portfolio was revalued at £180.1m at the year-end.
Spencer’s portfolio includes property at Arrowe Commercial Park, in Wirral; Link, at Huyton Business Park; Nexus, at Knowsley Business Park; Sefton Business Park; and Venture Point, in Ellesmere Port.
The company remains upbeat about its future, with a five-year plan being drawn up to make a persuasive case for refinancing.
It said: “While the bank continues to fund the group at the previous levels, negotiations remain ongoing with the group’s bankers, such that the directors anticipate that new facilities will be finalised during 2011 appropriate to secure the group’s funding requirements for the medium term.
“The directors continue to work on and finalise a five-year strategic plan to be agreed by the bank that will form the basis for the new facility, the specific covenants and the repayment profile expected.
“The group’s forecast and projections, taking into account reasonably possible changes in trading performances, show that the group should be able to operate within the level of the proposed facilities.
“On the basis of these forecasts, the ongoing negotiations, and after making enquiries, the directors have a reasonable expectation that the company will have adequate resources to continue in operational existence for the foreseeable future.”
Former chairman Jim Spencer stepped down from the board in September, after more than 50 years in charge. It had started as the family scrap metal business before it focused on property in the 1980s.
