O&Y;’s Revised Reorganization Plan Unveiled

Real estate giant Olympia & York Developments Ltd. has proposed a revised reorganization plan that could result in its unsecured creditors obtaining a sizable share of the company.

The plan, made public Wednesday, expands on an interim proposal filed last August. According to the new filings in Canadian and American courts, Toronto’s Reichmann family--controlling shareholders of O&Y--could; see its interest in the real estate company’s Canadian operations drop to 10% and its interest in the U.S. operations drop to 51%.

Olympia & York proposes to first issue bonds equal to the value of its debt to its unsecured creditors. If the company cannot pay off the bonds in full when they mature in five years, it is supposed to hand over equity to the unsecured creditors.

Olympia & York said it hopes that the plan, which still must be approved by the lenders, will settle the claims of its creditors while preserving its assets. The various classes of creditors are expected to vote on the plan at the end of November.

If creditors approve the plan, it must then be confirmed by the Court of Justice in Ontario and the U.S. Bankruptcy Court in New York. The company placed its Canadian and British assets under court protection in May after talks with its lenders collapsed on restructuring about $17.5 billion in debt.

In addition to issuing new bonds, the restructuring plan calls for several new companies to be created to redistribute Olympia & York’s assets. The first company, Reichmann Holdings, would be a holding company in which the Reichmann family would retain its interests.

Two other new companies would be created to separate Olympia & York’s real-estate assets in the United States and in Canada.

The new company that will receive the Canadian real estate, to be called O&Y; Properties, would be 90%-owned by Olympia & York’s creditors and 10%-owned by Reichmann Holdings.

Olympia & York said the new company for its American properties, OYRC Holdings, would “ultimately” be 51%-owned by Reichmann Holdings and 49% by unsecured creditors.

At first, however, the plan calls for the trustee for Olympia & York’s unsecured creditors to receive warrants to purchase the 49% of OYRC Holdings. Warrants would not be distributed to the creditors themselves until after the five-year Olympia & York bonds reach maturity.

Olympia & York said that by separating its American and Canadian real estate assets, it could take advantage of future upticks in the real estate markets of each country. It said it hopes that the existence of the separate U.S. company will “achieve substantial benefits” for the unsecured creditors.

The reorganization proposal also offers ways to address the claims of certain lenders whose debts were secured by non-real-estate assets, and it mentions a possible joint venture with four Canadian banks, involving several office towers in downtown Toronto.

However, the plan does not address claims made by creditors of Olympia & York’s U.S. subsidiaries. Nor does it attempt to offer any business plans for the huge Canary Wharf development in London, although it tries to deal with Canary Wharf creditors’ claims.