Rivoli seeks consents for mortgage-backed floaters; standstill needed

By Susanna Moon

Chicago, Nov. 29 - Rivoli Pan Europe I plc began a consent solicitation for its €413 million of class A commercial mortgage-backed floating-rate notes due 2018, €43 million of class B commercial mortgage-backed floating-rate notes due 2018 and €23.75 million of class C commercial mortgage-backed floating-rate notes due 2018.

The Dublin-based company is soliciting consents to propose a "short extension" to the senior facilities agreement for the MS Edificio Santa Hortensia, SL loan, according to a notice to bondholders.

A meeting to discuss the proposal has been set for Dec. 21 in London.

If the measures pass, the standstill proposal will be implemented by 11:59 p.m. on Jan. 10.

In order to form quorum, holders of at least 50.1% of the outstanding notes must be represented at the meeting, and at least 75% of votes must be cast for the measure in order for it to pass.

Background information

On Dec. 21, 2006, Rivoli issued €479 million of the commercial mortgage-backed floaters with proceeds used to acquire, by means of novation, a Spanish note issued by the Spanish issuer, according to the notice to bondholders.

The Spanish issuer used the proceeds of the note to fund the acquisition of mortgage instruments issued by CA-CIB Sucursal en Espana representing the Santa Hortensia loan and related security.

The loan was then applied to help finance the acquisition of an office building located in Madrid, let to IBM under a lease expiring on Sept. 30, 2015. The outstanding loan balance under the Santa Hortensia agreement is currently €105.1 million.

The Santa Hortensia loan is due Jan. 10, 2013.

Lease renewal discussions with IBM are ongoing, but IBM has not yet provided any formal indication of their intention to renew the lease.

Standstill proposal

In light of the upcoming loan maturity, the borrower said it explored various options to repay the Santa Hortensia loan, but believes it may be unable to do so. The company cited "the continuing distress in the Spanish financial and real estate markets as well as the specific situation relating to the building."

In order to repay the loan, the company has proposed a standstill period, waiving default, from Jan. 10, 2013 through April 10, 2013 to give it more time to restructure the loan.

If the standstill proposal is not approved, at the loan maturity in January the directors of the borrower will be under a duty under Spanish law to either file for insolvency or a pre-insolvency period of four months.

As a result, if the standstill proposal not be approved by noteholders, that it is likely that the sale of the building through a court-approved auction would take place during the 18-month to two-year period beginning in January. The borrower believes that there would be a significantly lower probability of an IBM lease being secured prior to such a sale, the notice said.

The principal payment agent is Citibank, NA, London Branch; the note trustee is Law Debenture Trustees Ltd.; and Irish paying agent is Citibank International plc.

The issuer and noteholders' financial adviser is Brookland Partners LLP (Gareck Wilson, email gareck.wilson@brookland.com or 44 207 645 5191). The borrower's financial adviser is AgFe LLP (James Wright, email james.wright@agfe.com or 44 203 219 5015).

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