Olympia & York Misses Another Interest Payment : Real estate: The Canadian government deals an added blow to the firm by refusing to back sale of an office tower.

Olympia & York missed another bond payment Monday and said it plans to sell additional pieces of its empire to raise cash to meet debt payments.

And in another setback, the Canadian government refused to back the sale of a Toronto office tower owned by Olympia & York Developments Ltd.

Don Mazankowski, Canada’s finance minister, told reporters in Ottawa that the government would not help lessen risk for potential buyers of O&Y;’s Exchange Tower building in Toronto.

“We think that’s clearly a private sector matter that can be best resolved by the private sector,” Mazankowski said.

The government’s guarantee was considered pivotal to the proposed sale of Exchange Tower, a 1-million-square-foot landmark that is home to both Olympia & York and the Toronto Stock Exchange.

Olympia & York had hoped the Canadian government would provide financial guarantees to limit the risk to a group of private banks seeking to buy the tower. Olympia & York said it planned to repurchase the building two years later from the investors at the sale price, plus interest.

“That means the existing plan to take over that debt will have to be changed,” said a Canadian property analyst, who spoke on condition of anonymity. “In the worst case, the building will have to be taken over.”

The real estate developer has been scrambling for cash in recent weeks as it tries to restructure $12.2 billion in debts. The company, the world’s biggest commercial landlord, is also seeking additional loans from banks to complete a massive office development in London called Canary Wharf.

“O&Y; also is pursuing other alternatives to address its liquidity problems, including the sale of assets, some of which will be announced later this week,” the company said in a statement.

Olympia & York has been shopping its combined 64% stake in Home Oil Co. Ltd. of Calgary, but it was unclear whether the company’s announcement referred to Home. An Olympia & York spokesman in New York declined to comment on the day’s developments.

Olympia & York confirmed that it missed a Monday deadline for a $14.45-million interest payment on bonds secured by First Canadian Place, a 2.7-million-square-foot office tower occupied by the Bank of Montreal.

Dominion Bond Rating Service of Toronto downgraded the $403.75-million in bonds on First Canadian Place last month, citing concerns about the building’s cash flow and vacancy rate.

Meanwhile, bankers were preparing for pivotal talks today in London concerning financing of Canary Wharf.

Olympia & York had asked banks for a $195-million loan to pay for tenant improvements and keep Canary Wharf going for the next three months. But the banks provided only $8.9 million and pushed ahead with debt talks this week.

“Obviously this one is at a key juncture,” said a U.S. banking source close to the negotiations, who spoke on condition on anonymity. “If we can get this one done, then the others will fall into place.”