Group of O & Y Creditors Rescind Move for Control

Bankruptcy court proceedings for Olympia & York Developments Ltd. took a turn for the better Friday, the company said, when a group of creditors withdrew motions to take control of key Canadian assets.

“We believe today has been the best day so far,” O & Y lawyer David Brown said.

A group of about 11 creditors, who had filed motions to exclude their properties from O & Y’s bankruptcy protection, withdrew those motions, O & Y lawyers said.

The creditors had been looking to free up key buildings from O & Y’s restructuring talks. That would have effectively put the assets in their own hands and opened an avenue to foreclose on the properties.

“It was a way of saying, ‘We don’t want to be involved in the plan; we want our buildings back,’ ” said Frank Bennett, an O & Y lawyer.

The buildings included Toronto’s Scotia Plaza and Exchange Tower and Calgary’s Shell Center and Fifth Avenue Place.

The Toronto-based property giant filed last month for bankruptcy protection for its Canadian and British assets, weighed down by $11.3 billion in debt.

Now the fate of all the Canadian assets will remain firmly in the hands of the Ontario court until O & Y presents its plan to restructure July 14.

Analysts said the move by the creditors validated earlier suspicions that many banks have too much to lose by foreclosing on O & Y properties and would prefer a successful restructuring of the company’s debts.

“What is most important ultimately will be if O & Y can work out an agreement with the creditors on a restructuring plan,” said Alain Tuchmaier, analyst at McLean McCarthy Ltd.

O & Y welcomed the news, saying it can now spend less time in court and more time negotiating with the company’s 91 bank lenders.

“We can switch our fronts from fighting skirmishes in court to focusing on negotiating a restructuring plan with our creditors,” Brown said. “We see it as a very, very positive development for O & Y.

“We will now be able to spend more time on a plan of reorganization and less time in an adversarial frame in court,” he said.