Olympia & York plans to seek court protection for the giant Canary Wharf project in London, a major blow to the developer's efforts to restructure $12.2 billion in debt, sources said Wednesday.
Toronto-based Olympia & York intends to ask a British court today to appoint an administrator to oversee the 71-acre office development that has been a severe drain on Olympia & York's finances.
The decision to seek an administrator essentially places Canary Wharf under control of British courts, roughly equivalent to bankruptcy protection in the United States.
The move came after lenders for Olympia & York Developments Ltd. refused to grant millions of dollars in additional loans to keep the project afloat, said people familiar with the talks who spoke on condition of anonymity.
Olympia & York declined to comment Wednesday evening.
Canary Wharf's bank debts total about $2.09 billion, and rescue of the project was central to Olympia & York's restructuring. Olympia & York's failure to win new funding essentially means bankers rejected the developer's May 7 restructuring plan, in which it offered banks a 30% stake in Canary Wharf in exchange for new loans, the sources said.
The developer filed for bankruptcy protection May 14 for most of its Canadian assets, but the move did not affect properties in the United States or Britain.
The expected filing will also not affect Olympia & York's U.S. holdings, but the future of the projects, including some of Manhattan's most prestigious addresses, are further clouded by the development.
The administrator would have the option of finding a new investor, approving new construction or perhaps selling Canary Wharf.
In any event, Olympia & York is likely to lose some, if not all, control of Canary Wharf, one of the developer's most ambitious undertakings. The firm envisioned the project, to include 28 buildings in East London's docklands, as a new financial center for Europe.