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Real estate industry

Leon Black's Investment Fund Acquires Key Debt in Olympia & York Developments Ltd.

Strategic Insights

— 2 min read

Leon Black's investment fund has acquired a significant portion of debt in Olympia & York Developments Ltd.'s U.S. subsidiary, putting him in a strong position to influence the company's restructuring. The subsidiary, Olympia & York Cos. (USA), is negotiating to restructure $5 billion in debt without filing for bankruptcy. Black's fund, Apollo Real Estate Investments, has a 31% stake in a $140-million loan made to the company, which is indirectly secured by some of its best properties, including the World Financial Center in New York.

Key Takeaways:

  • Apollo Real Estate Investments, an investment fund run by Leon Black, has acquired a 31% share of a $140-million loan made to Olympia & York Cos. (USA) by a bank group led by J.P. Morgan & Co.
  • The loan is indirectly secured by some of O&Y (USA)'s best properties, including the World Financial Center in New York.
  • Black's fund is now in a strong position to influence the company's restructuring, potentially giving him control of the company's equity.
  • The U.S. unit of Toronto-based O&Y is negotiating to restructure a total of $5 billion of debt without a bankruptcy law filing.
  • The parent company emerged from Canadian bankruptcy law protection last year.
  • Black's investment fund, Apollo, was formed last year to invest in distressed real estate, and has already paid $160 million for mortgage bonds secured by three other O&Y (USA) buildings in New York.
  • The strength of Black's position lies in the complex layers of O&Y (USA)'s debt, which would require the company to satisfy claims of secondary creditors like Black before addressing the claims of primary creditors like Citicorp.
  • Some of O&Y (USA)'s Canadian creditors, including Canadian Imperial Bank of Commerce and Hongkong and Shanghai Banking Corp., have expressed interest in acquiring the loan package held by the J.P. Morgan bank group.

Statistics:

  • $140 million: The value of the loan acquired by Apollo Real Estate Investments
  • 31%: Apollo's share of the loan
  • $5 billion: The total amount of debt that the U.S. unit of O&Y is negotiating to restructure
  • $160 million: The amount Apollo paid for mortgage bonds secured by three other O&Y (USA) buildings in New York
  • 1 year: The time since Apollo was formed to invest in distressed real estate

Sources:

  • The Wall Street Journal, New York NY

- BY LARRY M. GREENBERG and MITCHELL PACELLE

- October 1988

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