Rubicon Europe, backers in talks
THE European real estate arm of Allco Finance Group's troubled Rubicon property empire is renewing crisis talks with its financial backers after a sharp fall in the value of its asset portfolio.
THE European real estate arm of Allco Finance Group's troubled Rubicon property empire is renewing crisis talks with its financial backers after a sharp fall in the value of its asset portfolio.Rubicon Europe Trust is seeking to restructure its existing agreements with its note-holders and lenders, following a double breach of its banking covenants caused by a 15 per cent in the carrying cost of four of its main property investments.From a book value of EUR672.5 million ($1.1 billion) at the end of last December, the assets in Germany, Belgium, the Netherlands and Austria are now said by valuers to be worth EUR568 million.Prior to the latest valuations, the portfolio had been steadily increasing since December 2005 when Rubicon Europe acquired the properties. Purchased for a combined EUR586 million - EUR21 million less than their original price - their value soared in a booming property market to the point where Rubicon booked a near- EUR90 million paper profit.But the global credit crisis - which has undermined the trust's debt-laden business model - and the growing economic slowdown have caused property prices to fall away and buyers to retreat.Rubicon Asset Management, which runs the European trust and its sister American fund on behalf of the equally debt-stricken Allco group, is in the process of selling assets as part of a deal to pay back its lenders. Yesterday's disclosures come after Rubicon America disclosed similar falls in asset values a month ago.In a statement to the ASX yesterday, Rubicon Europe underlined the crucial connections between the note holders of its financing and property owning offshoots and its main lenders, Credit Suisse and National Australia Bank - all of which need to agree on a new deal if its recovery plan is to remain on track.The lower valuations means the note-holders could claim Rubicon Europe is in default of its repayment commitments and demand all outstanding loans be repaid at once. This could affect cross guarantees given by the real estate funds to the financing arm and result in Credit Suisse declaring its loans in default. This would also require immediate repayment as opposed to the monthly schedule of repayments currently in place.That would lead to NAB calling in its corporate facility, raising further doubts as to the future survival of the trust.Rubicon Europe's shares slipped 1.9c to 7.7c yesterday.
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