Lloyds faces £200m loss as property company withers into receivership

Published 08th Jan 2010

Lloyds Banking Group is facing a loss of at least £200 million after Kilmartin, an HBOS-backed property company, went into receivership.

Directors of Kilmartin Holdings, a Scottish group founded by Iain Wotherspoon, the property entrepreneur, handed over the company to PricewaterhouseCoopers (PwC), the accountant, yesterday, along with Kilmartin Property Group. Annfield Assets, another subsidiary, has gone into administration.

The developer, once Scotland’s biggest, with offices in London, Sheffield and Edinburgh, owns office, industrial and retail sites across the UK, as well as having joint ventures with British Waterways, UK Coal and JP Morgan. HBOS pumped about £500 million of loans into the company during the property boom, much of it under Peter Cummings’s now-notorious reign as business lending chief. The portfolio of sites is worth about £300 million, leaving the bank facing a £200 million hit on the loans if the assets are sold.

HBOS also has an equity stake in the company, which was worth 50 per cent in 2008.

The appointment yesterday is a demonstration of the size of the task that Lloyds, in which the taxpayer has a 43 per cent stake, faces in unravelling the estimated £100 billion commercial property loanbook that it inherited from HBOS.

Thornfield Ventures, a non-trading holding company of the HBOS-backed Thornfield Properties, the developer of The Rock shopping centre in Bury, Greater Manchester, was also placed in administration with Deloitte yesterday. Hammerson will now complete the 1.6 million sq ft scheme, which is backed by £280 million of Bank of Scotland funding and is set to be completed in the summer.

Yesterday’s appointments follow the administration in November of Kenmore Property Group, another Scottish company, set up by John Kennedy, which owed its rise and subsequent fall to HBOS.

Mr Cummings is thought to have been instrumental in lending to both companies. The former HBOS executive has been blamed for signing off loans against risky property assets that subsequently plummeted in value, ultimately contributing to the bank’s ignominious takeover by Lloyds.

Lloyds is also chasing debts owed by Kandahar Properties, another HBOS-backed property group, which is owned by David Ross, the co-founder of Carphone Warehouse and a Conservative Party donor.

In October 2008 Mr Wotherspoon, who founded the company in 1996 and was on the Sunday Times Rich List by 2008 with an estimated wealth of £75 million, said that Kilmartin owed its existence to HBOS’s “foresight and flair”. He added that it was a “tragedy to contemplate losing the Bank of Scotland, who have been integral and at the cutting edge of most of the property sector in this country”.

Lloyds is understood to have already written off the £200 million after cracks began to emerge at the company in 2008, when Kilmartin Holdings revealed a net deficit of £16.4 million at April 30.

Its 2008 results showed a pre-tax loss of £46.7 million and indicated liabilities of £288.7 million, due to be paid within a year, as well as an overdraft that would come up for renewal in mid-2009.

PwC said that the company had a number of subsidiary and fellow group companies that remained solvent and were not subject to an insolvency process.

Lloyds and Kilmartin declined to comment and Thornfield could not immediately be reached.

Source: ' Times '

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