Renegotiation over HBOS loans for two more firms

Published on Sunday 10 October 2010 14:35

TWO more Scottish businesses formerly backed by HBOS are facing negotiations over debt with the lender's owner, Lloyds Banking Group.

Both Miller Group and House of Fraser were enthusiastically backed by HBOS before lending ground to a halt at the onset of the banking crisis. Lloyds now faces working out billions in HBOS corporate loans and joint ventures that have turned sour, which has resulted in the collapse of a number companies and owners seeing their stakes diluted as debts are restructured.

But Miller, the UK's largest privately-owned housebuilder, has hit out at reports comparing it to other Scottish property firms that have been put into administration by Lloyds as "misleading and mischievous".

Edinburgh-based Miller released a statement last night insisting that its 800 million debt is unsecured and provided by a trio of banks - Lloyds, Royal Bank of Scotland and National Australia Bank - and is "not affected by restructuring within Lloyds Banking Group".

The firm declined to clarify what proportion of the debt was owed to each bank.

The loss-making housebuilder said it had paid down 135m of debt in the first six months of the year and that its existing facility was committed to 2012. It also reported it had secured 300m worth of construction projects this year.

But its latest accounts also show shareholder funds have dwindled to 27.5m, hit by the firm's 27m loss in the first half of the year, raising the prospect that it might need to refinance or find other means of making future debt repayments, such as asset sales or from cash flow.

Miller was the last firm in the UK to do a major deal with Peter Cummings, HBOS's former head of commercial banking, when the lender bought a stake in the firm from members of the Miller family. Lloyds has since taken over the bank's 20 per cent stake in the housebuilding and construction firm.

A spokesman for the housebuilder said Lloyds "remains a long-term equity investor" in the firm. The spokesman added that comparisons to Elphinstone, a housebuilder and land company that went into administration last month, and two other failed property businesses, Kenmore and Kilmartin, were inaccurate.

"Any attempt to compare the group with other much smaller and specialist companies is entirely misleading and mischievous," he said.

Meanwhile, House of Fraser, the owner of Jenners, is also in discussions with Lloyds over a 65m property debt facility. Reports suggest the retailer, which is 11 per cent owned by Sir Tom Hunter, is negotiating a debt-for-equity swap that will boost the bank's stake in the retail firm beyond its current 5.5 per cent.

House of Fraser's owner, Highland Group Holdings, said in its most recent accounts that it was in talks to restructure its property loans.Lloyds took on the debt when it swallowed HBOS.

Highland Group's report also said it had taken a 50 per cent stake in Edinburgh delicatessen Valvona & Crolla in exchange for 300,000 worth of debt.

• Another Scottish property venture, the Stirling Development Agency, has agreed a 12.5m refinancing with Lloyds-owned Bank of Scotland, securing debt facilities until 31 December, 2013. The firm, which is a joint venture between Stirling Council and Australian property giant Valad, is committed to investing 100m into the Stirling area over the next five years.