Icelandic bank Kaupthing called in £1.8bn loan to Robert Tchenguiz, above. Photograph Micha Theiner/City AM / Rex Features
A complex offshore corporate structure created by Mayfair real estate tycoon Vincent Tchenguiz to hold Britain's largest property maintenance and residential freeholds business, has been quietly surrendered to lending banks.
The freeholds and maintenance contracts are spread across the UK and include thousands of McCarthy & Stone retirement home developments as well as several luxury residential complexes on the banks of the Thames such as St George Wharf in Vauxhall, Charter Quay in Kingston-Upon-Thames and Putney Wharf Tower.
Tchenguiz effectively forfeited shares in a web of holding companies valued at more than £220m two years ago having pledged them, just months earlier, as collateral in an ill-fated attempt to stop Icelandic bank Kaupthing calling in a £1.8bn loan to his brother Robert.
Despite Vincent's efforts, the loan to his brother continued to sink into negative equity and was called in as Kaupthing itself collapsed in October 2008. The collateral backing the Tchenguiz loan was later seized by the bank's liquidators.
The assets underlying shares surrendered by Vincent Tchenguiz amount to a multibillion-pound property empire. It includes a portfolio of residential freeholds which earns hundreds of thousands in ground rents from tenants and leasehold transfer fees from those who sell.
Vincent has also effectively lost control of Peverel, a controversial group of companies which offers property maintenance, repairs and other additional services such as CCTV and buildings insurance.
Accounts filed by UK companies do not make clear that the property tycoon has lost control of holding company shares but the full picture is laid bare in court papers filed as part of a legal claim being brought by trustees to the Tchenguiz Family Trust (TFT) against Kaupthing.
As reported in Saturday's Guardian Money, recent years have seen a groundswell of frustration among tenants, variously claiming unreasonable rises in service charges, buildings insurance charges and leasehold transfer fees.
Some disgruntled tenants claim Peverel companies have also failed to adequately carry out maintenance and repairs. A website, thetruthaboutsolitaire.co.uk, set up by angry tenants, has had almost 160,000 visitors in the last 16 months. Solitaire Property Management is part of Peverel.
Meanwhile, residents at St George Wharf, a 900-apartment luxury riverside development overlooking Parliament, have for years been in dispute with landlord companies, including Tchenguiz-linked firms, and Peverel group service companies. A claim for £2.6m in alleged overcharging, supported by more than 300 residents, is to go before the leasehold valuation tribunal in May.
Much anger has been directed at Vincent Tchenguiz as company accounts for relevant UK-registered businesses state that the ultimate controlling party is the TFT, where the property tycoon is an adviser and a beneficiary.
But court papers from an ongoing case reveal shares in 14 holding companies incorporated in the British Virgin Islands, and a further four UK firms, are under the control of receivers acting for Kaupthing.
Unfortunately for Kaupthing creditors, however, the shares may not hold the value they appeared to promise three years ago. The vast majority of assets within the complex web of companies are already pledged to other banks – Deutsche Bank, Bank of Scotland (now part of Lloyds Banking Group), Merrill Lynch, BayernLB and Allied Irish Banks (UK) – under pre-existing long-term senior loan agreements.
Moreover, these agreements contain so-called "change of control" clauses which give these banks the right to call in loans if Tchenguiz fails to keep control of the corporate structure. Receivers from Grant Thornton, appointed by Kaupthing, could therefore officially take control of the underlying businesses at will. They have not technically done so, however, for fear of triggering a chain of defaults which could leave the shares that Kaupthing took as security from Vincent Tchenguiz three years ago valueless.
According to court papers filed by TFT trustees, Kaupthing's decision to appoint joint receivers over several companies' shares has already triggered various events of default. The papers claim Vincent had repeatedly warned Kaupthing liquidators of "the ruinous impact of … the appointment of receivers … on Kaupthing's security position."
The document claims that, while negotiations are still ongoing, "in effect Merrill Lynch have, as a direct result of the events of default, assumed control of the underlying portfolio, [the parent company behind the Peverel group]."
The bank has converted the loan from a long-term agreement to an overdraft repayable on demand. A 1% additional default rate of interest is being charged, adding pressure on the group to maximise the earnings it can extract from tenants' service charge contracts.
Similarly another big loan, arranged by Lloyds and advanced against part of the ground rents empire, has drifted into trouble. Lloyds, the taxpayer-backed bank, is charging a 1.75% additional default interest on the loan. According to court papers filed by TFT trustees, despite ongoing attempts to restructure the Lloyds loan, the bankers "in effect have … assumed control".