Hunter's £88m stake in builder is written off

Published on Friday 27 February 2009 20:34

SIR Tom Hunter has written off his £88 million stake in retirement property builder McCarthy & Stone as a debt-for-equity deal saw the firm's main lenders take control of the business.

McCarthy & Stone said yesterday the business would be transferred into a new "corporate structure" by the banks, understood to be Lloyds Banking Group and HSBC.

Hunter was part of an HBOS-led consortium which bought the builder – which has significant operations north of the Border – three years ago for 1.1 billion.

Confirmation of the McCarthy & Stone deal came just week after a similar agreement saw Hunter lose his stake– worth 35m at the time of the takeover in 2007 – in housebuilder Crest Nicholson.

Another debt-for-equity deal this week diluted his stake in garden centre chain Wyevale from 40 per cent to 25 per cent.

It has been estimated that the tycoon – for a long time Scotland's richest man – has lost as much as half his 1bn fortune due to his exposure to the property and retail sectors.

McCarthy & Stone had been unable to service its debt after the housing market slump resulted in fewer elderly people being able to sell their properties to move into retirement homes and flats.

It is understood that the debt-for-equity swap was favoured by the banks – the "senior lenders" – as it gives them greater potential for increased returns when market conditions improve.

A source close to the deal said that the company's existing 700m of debt to the senior lenders would be reduced to 500m. The banks will take a 200m equity stake in the company.

Stakes held by so-called "junior lenders", including Hunter and property entrepreneurs David and Simon Reuben, have been wiped out.

Total borrowing backing the takeover in 2006 amounted to more than 900m.

Last night a source said that Hunter had written off the 88m he paid for the 8 per cent stake in McCarthy & Stone "months ago". He added: "I think Sir Tom was expecting this to happen – if anything else had occurred it would have been a bonus."

The deal, which is subject to a formal court process, could yet be challenged by the Reubens, who have previously battled to retain an interest in the firm.

McCarthy & Stone chief executive Howard Phillips said the company would "continue to be, a great business" and had "the opportunity to benefit when the present market difficulties have been resolved".

A spokesman for Hunter's West Coast Capital investment vehicle refused to comment.

Hunter retains an interest in the property sector through his stakes in Prestbury Hotel Holdings and Prestbury West Coast Holdings, with entrepreneur Nick Leslau.

But his retail portfolio has recently been hard hit, with high street chain USC falling into administration in December, although a new company, Dundonald Holding, also owned by Hunter, rescued some of the chain.

He also has a 10 per cent holding in Jenners owner House of Fraser.