Developer Is Facing Major Cash Crunch : Real estate: Olympia & York’s restructuring involves more than $20 billion in debt and ranks as one of the largest ever of a private company.

Olympia & York Developments Ltd. confirmed Monday that it is suffering a “liquidity crisis” but said that short-term financing for its far-flung real estate empire had been arranged with major lenders.

The disclosure by the privately held company, which has interests in at least two Los Angeles office buildings as well as extensive holdings in Canada, London and New York, shook the Toronto Stock Exchange as many bank and construction company stocks slumped Monday.

The disclosure, first reported in the Wall Street Journal, also touched off speculation about the potentially dire impact the property giant’s financial woes might have on the world’s already depressed commercial real estate markets.

“The (real estate) market simply turned against them,” said David Shulman, a real estate analyst for Salomon Bros. in New York. “It’s too early to tell if things will work out or get a lot worse.”

Olympia & York’s restructuring, involving more than $20 billion in debt, ranks as one of the largest ever of a private company. The company is likely to be forced to give up equity in some projects to banks for easing of terms for loan repayments.

“Olympia & York owes so much money that the banks have no choice,” Shulman said.

A company spokesman confirmed Monday that Olympia & York had arranged for additional financial help from its major lenders. He added that the company planned to discuss its debts with its bankers.

The development firm is owned by the powerful Reichmann brothers of Canada, who turned a floor and tiling company into the holder of one of the largest collections of real estate assets in the world.

The financial difficulties of Olympia & York, whose vast holdings have led some observers to deem the company too big to fail, stem from slumping world real estate, newsprint and energy markets--all sectors in which the firm has made huge investments.

Among its biggest projects are a 71-acre, $6.5-billion mixed-used commercial reclamation development in an old industrial section of London called Canary Wharf and the expansive Yerba Buena Center being planned for downtown San Francisco. It is also one of New York’s biggest landlords after a 1977 buying spree in which it purchased eight Manhattan office buildings for $320 million.

In Southern California, Olympia & York has a 50% interest in the World Savings Building on 11601 Wilshire Blvd. and about a 45% interest in the 400 S. Hope building, according to local real estate brokers and lawyers.

“They were very, very good at financial analysis--bringing the building in on time and on budget,” said Richard S. Volpert, a Los Angeles lawyer who helped the Los Angeles law firm O’Melveny & Myers negotiate its development deal with Olympia & York for the 400 S. Hope building. “They were first-rate people to deal with.”

Real estate experts speculate that any failure by Olympia & York to repay its debts could have wide implications because it owes more than two dozen banks at least $100 million each.

An official at Security Pacific Bank in Los Angeles denied a published report that the bank has significant exposure to the developer. The bank “has no direct exposure to any of Olympia & York’s major commercial real estate projects, including Canary Wharf,” the spokesman said.

The news of Olympia & York’s problems reverberated in the world’s financial centers. The Toronto Stock Exchange 300 index slumped 26.25 points to 3,443.70. On Wall Street, Moody’s Investors Service downgraded the commercial paper ratings of an Olympia & York subsidiary because of concerns about lease payments at the Gulf Canada Square project.

Last month, Olympia & York received an 18-month reprieve on its final $17.9-million payment to the San Francisco Redevelopment Agency for a parcel of city land where the company plans to build a 30-story office building.

Wires services contributed to this report.