This article is from the Australian Property Journal archive
MACQUARIE DDR Trust has drawn against its non-refundable $US25 million letter of credit setup during the Mervyns transaction.
The trust said although Mervyns has advised it continues to progress its debt restructure and realign its business operations in accordance with its Chapter 11 filing, and remains up-to-date with all rental payments, management have decided to draw on the letter of credit to protect the trust’s interests. This ensures that the joint venture receives its full entitlement and control of the $US25 million.
MDT is a shareholder in the 50:50 joint venture with Developers Diversified, which owns the Mervyns-leased portfolio of 37 properties.
Drawing on the letter of credit has involved the establishing of a collateral pool of funds of $US58 million ($US29 million, MDT share) comprising:
- $US25 million ($US12.5 million, MDT share) deposited under the letter of credit; and
- $US33 million ($US16.5 million, MDT share) deposited by the joint venture.
This collateral pool will be held in a lender-controlled account on behalf of the joint venture against the 37 properties on a pro rata basis (approximately $US1.56 million per property).
The trust is funding the $US16.5 million share of its contribution out of available cash and existing facilities.
The collateral pool of $US58 million will be made available to the joint venture where Mervyns rejects or cancels any leases as part of the Chapter 11 process, the pro rata share of the collateral pool can be used to cover costs associated with re-tenanting
and fit-out with any residual returned to the joint venture.
Also if Mervyns affirms or accepts leases as part of the Chapter 11 process, the pro-rata share of the collateral pool will be released to the joint venture without restrictions.
Australian Property Journal
