UK: Battersea Power Station bankrupt despite tube extension

[John Ashworth]

Battersea Power Station calls in administrators

Plans for £5.5bn redevelopment of derelict London landmark in doubt days after George Osborne and Boris Johnson announce enterprise zone and tube extension

Juliette Garside
guardian.co.uk, Wednesday 30 November 2011 20.40 GMT

Battersea Power Station is going into receivership, with its £5.5bn development scheme in tatters, two days after George Osborne and Boris Johnson posed in hardhats to announce an enterprise zone and tube extension to the listed building.

In one of the highest-profile property collapses since the credit crunch, Battersea's creditors have secured a high court hearing on 12 December to confirm Ernst & Young as administrators.

The lenders – Lloyds Banking Group and the Irish National Asset Management Agency (Nama) – are to take control of a stalled sales process for the long-derelict site, which has planning permission for a huge scheme of 3,400 homes and 900,000 sq metres of retail and office space.

The Irish property tycoons Johnny Ronan and Richard Barrett acquired the landmark building in 2006 through a subsidiary called Real Estate Opportunities. About £502m of debts owing on the project have now been called in.

Lloyds and Nama now want £324m repaid, and Battersea's previous owner, Victor Hwang's Oriental Properties, which sold the power station in a £400m deal, has asked for the return of a £178m vendor loan.

In a statement, REO said: "The BPS [Battersea Power Station] subsidiaries are currently not in a position to satisfy these demands for repayments. The company has also been advised that NAMA and Lloyds Banking Group have applied to the English court for the appointment of administrators."

An agent was appointed in March last year to find a buyer for a 50% stake in the scheme, at a valuation of about £500m. REO eventually agreed a bid from the Malaysian property group SP Setia, which had offered to buy out the debt at a 15% discount, but the creditors did not like the terms and rejected the deal.

Chelsea Football Club, British Land and the private equity group Blackstone have all run the rule over the power station. Europe's largest brick building, it was erected in the 1930s and immortalised on a Pink Floyd album cover and in films including the Beatles movie Help! and Sir Ian McKellen's Richard III.

On Monday, Osborne and Johnson visited Battersea to underline the government's commitment to building a tube spur from Kennington via Nine Elms to the power station. News that plans for Battersea's prime site have stalled could jeopardise the wider scheme, which it was hoped would generate up to 25,000 jobs.