China invests in Canary Wharf with 880m bail-out of Songbird
China is set to become the joint-largest shareholder in the owner of Canary Wharf after joining an 880m bail-out of Songbird Estates with its first major investment in UK property.

By Graham Ruddick
Published: 8:25PM BST 28 Aug 2009

Going for a Songbird: the property group that owns Canary Wharf in London is to raise equity to pay off debt Photo: Getty Images
In a sign of the increasing influence of the East, Qatar has joined the Chinese sovereign wealth fund, China Investment Corporation, in supporting a substantial equity raising that will help Songbird pay off an 880m loan from Citigroup that is due next May and threatens the company's future.
The value of Canary Wharf, home to some of the world's largest financial services groups, has tumbled since 2007 as a result of the turmoil in the global economy. Songbird, which owns 60.8pc of Canary Wharf Group (CWG), risked breaching loan-to-value covenants in a November test on the Citi loan, its only debt.
The value of the Songbird portfolio fell almost 30pc to 4.9bn in 2008 and David Pritchard, the chairman, said the company "could have gone down the path of a liquidation or administration" if the new deal had not been struck, echoing the problems the original developer of Canary Wharf faced in the early 1990s.
"This deal secures the future of Songbird on the best possible basis for our shareholders," Mr Pritchard said.
Songbird has secured commitments to subscribe and underwrite to an issue of ordinary and preference shares from CIC and existing shareholders Qatar Holdings, Morgan Stanley and Simon Glick, the New York investor. However, British Land, the FTSE 100 property company, will not take part in the fundraising and faces its 18pc equity stake being almost completely wiped out.
British Land would not comment on its decision, however Mr Pritchard said the company was pursuing "different strategic" interests and was not keen on "minority interests in a competitor".
British Land's involvement helped Songbird to clinch control of Canary Wharf in 2004 ahead of a rival bid from Paul Reichmann, the former Canary Wharf chairman, and Canadian conglomerate Brascan, now known as Brookfield. John Ritblat, then the British Land boss, is believed to have been attracted by Canary Wharf's retail assets, which are based beneath the offices.
The collapse of Songbird would have created major uncertainty for CWG, which controls the majority of the Docklands estate, although its own financial position is secure with around 1bn of net cash on the balance sheet.
George Iacobescu, the chief executive of CWG, said: "The new equity investment by two sovereign wealth funds, together with the Morgan Stanley and Glick family investments, are a strong endorsement of what Canary Wharf has achieved and what Canary Wharf is in terms of a unique and high quality real estate asset."
Songbird plans to provide full details of the scheme next month, but should raise around 836m, given that it is paying the loan off at a 5pc discount. Approximately one third, 275m, will be preference shares, and two thirds, 550m, ordinary equity issued at 1p per share, a huge discount to last night's share price of 33p.
CIC and Qatar have subscribed for all the new preference shares, which will be non-voting and non-preferential, and are also underwriting the ordinary shares, which will be offered to the holders of existing B shares listed on Aim, alongside Mr Glick's GF Investments II. Depending on how many shareholders take up their rights, CIC and Qatar could each own up to 30pc of Songbird with the remainder shared between Mr Glick, Morgan Stanley and smaller investors. view-source:China invests in Canary Wharf with 880m bail-out of Songbird - Telegraph