Vincent Tchenguiz, the property tycoon, is expected to cede a big stake in the UK’s largest property management company in a debt-for-equity swap with lender Bank of America Merrill Lynch.
BofA owns more than £100m of debt behind Peverel, an employer of 4,500 people across various property and retirement accommodation divisions, which was acquired by Mr Tchenguiz at the height of the real estate boom in 2007.
Peverel and its subsidiaries manage about 200,000 leasehold properties across the country, from expensive flats in London to modest retirement flats. It collects rent from some 70,000 elderly people in the UK.
The business is still making annual pre-tax profits of about £11m, according to people familiar with the matter. They said this level – about half its earnings before the recession – meant it was only just covering the interest costs on the debt.
BofA has been in negotiations with Mr Tchenguiz about a consensual restructuring of the company’s finances for the past month to help reduce the interest payments, although the exact structure and size of stake to be taken by the bank have not yet been finalised.
The bank could end up with a controlling stake, according to people familiar with the matter. They said the deal was well advanced. All parties declined to comment.
BofA will acquire the stake through its private equity arm, although the loan was originated by its real estate finance team when Mr Tchenguiz acquired the business in 2007. He paid about £500m for the company, although part of that price related to a now separated ground rents portfolio.
Peverel, which was once owned by McCarthy & Stone, the retirement housebuilder, controls many other managing agents, including OM Property Management, Solitaire Property Management and Pembertons Residential. It generates a steady fee income from its services and is trading well with revenues of about £70m last year, according to people familiar with the matter.
Peverel also owns Kingsborough Insurance Services, which arranges building and contents cover; Cirrus Communication Systems, which installs CCTV; and CarelineUK, which provides emergency alarms in retirement homes.
Separately, Mr Tchenguiz owns many freeholds of properties managed by Peverel. Both Peverel and his ground rents business are owned by the Tchenguiz Family Trust, the holding company of Mr Tchenguiz.
The business has come under the spotlight in recent months for its management fees following complaints among residents. The Office of Fair Trading has investigated the fees being levied in the unregulated sector.
Mr Tchenguiz financed the acquisition of Peverel from US owner Holiday Retirement Corporation using a complicated series of interest rate and inflation swap transactions in 2007 created by Merrill Lynch.
Mr Tchenguiz has mostly avoided the public debt problems that have affected the retail and leisure empire built up by his brother Robert in the past three years.