Canary Wharf bondholders do battle over Clifford Chance HQ sale proceeds

Deutsche Bank and Canary Wharf Group are seeking a court resolution over a financing deal following the £795m sale of Clifford Chance’s 10 Upper Bank Street building.

Deutsche Bank’s trustee business and Canary Wharf Finance II, a CWG subsidiary, are asking the court for a decision over whether to pay out £168.8m to note holders following the sale.

CWG brokered the sale of the 32-floor building to Qatar Holdings and China Life last Friday (20 June). China Life took up a 70 per cent interest in the building, Qatar Holding 20 per cent while CWG retained 10 per cent.

The sale of the tower formed part of a wider financing deal undertaken by the company and was due to pay off £577m of CWG group debt.

However the trustees argued that note holders could be due a bigger chunk than that already paid due to a ‘spens clause’ in the deal. The clause is aimed at protecting investors and discouraging note holders from early redemption. Issuers are forced to pay a premium if they redeem bonds early.

CWG said it would ask the court for a decision over the disputed pay out and handed the sum to Deutsche Bank AG’s London branch to hold in escrow until the fight is resolved.

Canary Wharf Finance II issued A1, B and C notes as part of a securitisation deal and was due to redeem the notes on 22 July 2014.

Deutsche said: “It is unclear to the Trustee as to whether an additional amount of £168,746,800 should be paid to the holders of the Class A1 Notes in connection with the redemption.”

It added: “The issuer intends to make an application to the Court for a declaration as to whether, on a true construction of the Conditions and other relevant contractual documentation, the Premium is payable to the Noteholders.”

The building at the heart of the securitisation deal is home to Clifford Chance. The firm is a longstanding adviser of the group.