Banks seize control of Opal

Opal Property Group is understood to be in the process of being broken up and assets handed to its banks after failing to refinance £886m of debt with 14 lenders.

Manchester-based Opal is one of the biggest student accommodation owners in the country with 20,000 beds and partnerships with 14 universities.

The business, which employed 550 staff according to its annual accounts to 30 September 2012, was founded 25 years ago by Stuart Wall, who retains 100% of its shares.

Opal had until 1 March 2013 to agree a deal with lenders. Of the £886m facilities, £412m with four lenders had already expired before the start of the year. There was also a liability of £186m on an interest rate swap contract. This takes total debt to £1.072bn. The portfolio was valued at £1.069bn on 30 September 2012; a loan-to-value rate of more than 100%. Annual loan interests were running at £53m.

Staff at Opal and Ocon were told of the imminent break-up this week and put on notice of consultation of redundancy. Specialist property and construction recruitment agencies have been fielding enquiries from Opal workers and sending out CVs to potential employers in the Manchester area.

Opal subsidiary Ocon Construction this week filed notice of intention to appoint an administrator. Ocon has already transferred its £50m, 1,259-bed project Crown Place for Liverpool University to the university.

Liverpool University said in a statement: "The university has established a subsidiary construction company in order to take over responsibility for the delivery of its student residential development, Crown Place. As part of the arrangement agreed by Opal Property Group and the university, staff currently employed by Ocon will transfer to the new university subsidiary."

The lenders involved include Alliance & Leicester, Bank of Ireland, Barclays, Britannia Building Society, Irish Bank Resolution Corporation (formerly Anglo Irish Bank), Lloyds Banking Group, National Australia Bank, Nationwide Building Society, the Royal Bank of Scotland and Svenska Handelsbanken.

In November 2012, turnaround specialist Steve Bodger from restructuring consultant Alchemy, was appointed as a director of Opal Property Group.

The highest paid director of Opal Property Group took a salary of £490,000 in 2012, up from £90,000 in 2011. According to the accounts for the year to 30 September 2012, Wall did not take a salary from the group before 2012. Group sales last year were £143m, producing a loss of £2.1m.

Deloitte, auditor to Opal Property Group, said in its statement to accompany the 2012 accounts that the business' survival was dependent on "whether the current banking facilities will continue to be provided or that a satisfactory asset disposal or restructuring agreement will be achieved during the standstill period [up to 1 March 2013] or thereafter. If there was insufficient support then it is possible that the group would not be able to continue as a going concern resulting in a break-up of the business."

No administrator has been appointed to Opal. Ocon Construction's website has been taken down. Opal Property Group declined to comment.

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