O & Y Staves Off Its First Foreclosure in U.S.

Olympia & York Developments Ltd. staved off its first foreclosure in the United States on Thursday when a group of banks decided to delay seizing part of the collateral backing a $160-million loan that is in default, bankers said.

The banks had planned to seize and auction a swap agreement, but after a last-minute discussion with O & Y, they decided to postpone the action until June 18.

O & Y, the Toronto-based property giant, last month filed for bankruptcy protection for its Canadian and British assets, and it is battling to avoid a similar fate in the United States. O & Y is weighed down by $11.2 billion in debt.

O & Y is trying to persuade its major U.S. lenders to agree to a moratorium on principal repayments, and it cannot afford to let one group seize any significant piece of collateral.

In the case of the swap agreement, a group of banks led by J. P. Morgan & Co. had threatened to seize the asset Thursday and auction it in lieu of repayments due on their syndicated loan.

However, bankers said the move was postponed to give O & Y and the banks more time to negotiate a settlement.

O & Y meanwhile continues to hold discussions with its other bank creditors and is believed to be looking at the possibility of selling some of its real estate assets in the United States, according to bankers.

Separately, the Financial Times of London reported that British-U.S. conglomerate Hanson and U.S.-based construction and engineering group Bechtel Group Inc. are in talks on the possibility of linking up to look at O & Y’s Canary Wharf project in London.

The newspaper quoted Lord White, chairman of Hanson Industries in the United States, as saying: “There is a possibility that we might establish a joint venture in our approach to Canary Wharf.”

Canary Wharf, a giant office development in London’s Docklands area, last week was put into British court protection from creditors.

A Bechtel spokesman in San Francisco told the London paper that a representative from its property development and investment division had a preliminary conversation with Hanson about Canary Wharf a few days ago.

The discussion centered on how the division, Bechtel Park Towers Ltd., could help Hanson as it considered the Canary Wharf project, the spokesman said.