Opal Property founder Stuart Wall fumes over administration
THE founder of failed student accommodation provider Opal Property Group claims legal action he is taking against lender Royal Bank of Scotland for an interest rate Swap product is behind the collapse of the business.
Stuart Wall, who owned 100% of Manchester-based Opal, alleges that RBS – one of more than a dozen lenders owed more than £900m – has driven the business into insolvency, and by refusing to let his team continue to manage the 48 properties, will trigger more than 40 redundancies next week.
The businessman, who has launched a High Court action against the bank, says he is devastated over the demise of the company which has its headquarters at The Place apartment-hotel on Ducie Street, Piccadilly.
RBS hotly disputes Mr Wall’s claims, and says it was the failure of Opal subsidiary Ocon Construction – which relied on inter-group loans for funding – that sparked the insolvency of the parent group last week.
The bank said its focus is now on ensuring the 20,000 students in Opal’s properties see no disruption or inconvenience.
It denies liability of all the claims raised by Opal but declined to comment, because of the potential litigation, on the allegedly mis-sold swap product which Opal signed in 2007 as part of a syndicated £440m refinancing deal.
A spokesman said that RBS, along with the other lenders, had given Opal ample time to agree new funding last year, and had agreed a standstill deal last December, giving it another opportunity to resolve the situation.
TheBusinessDesk.com understands that lenders also had serious concerns over the levels of executive pay at Opal – which in the year to the end of September 2012 rose from £307,000 to £1.1m, with the highest paid director’s package increasing from £90,000 to £490,000. This came despite the group being in default of its banking covenants. There was also lender disquiet over the group’s ownership of a private aircraft and a Swiss ski chalet.
Opal, which comprised of more than 60 separate companies, has been placed in the hands of at least four insolvency firms, Ernst & Young, Grant Thornton, PwC and KPMG.
Mr Wall told TheBusinessDesk.com: “We built a group valued at more than £1bn and have never missed an interest payment in 25 years. I have to say that the last few months has left me feeling that there is something rotten in the commercial world.
“I have lost all my equity and have offered to resign too in an effort to try and save the jobs of the people here.
“The head office team here is a lean and efficient. These people know the operations well – I just can’t understand how moving this to another company is sensible or in the best interests of tenants. It will cost money and jobs.”
He claims the 15-year Swap deal was signed on the understanding that the funds would be raised under a long-term securitisation of some of the group’s assets. The securitisation fell through though, and a five-year loan was agreed instead.
Mr Wall said: “We asked why the loan was only five years if the Swap was for 15. They answered the loan would be extended if we managed it properly.
“We did not know the bank could cancel the Swap. This meant it did not give the protection we expected following advice from the bank – that is, protecting us against high interest rates.
“For the next five years we continued to make every loan payment on time and in full. We were paying at least £8m more per year than the interest rate, £40m in the whole five years of the loan.”
Mr Wall said that Opal was left with a “minimal amount of cash to operate its business” as a result of the terms of the standstill agreement.
He alleges that RBS has tried to stop it pursuing the High Court case over the Swap: “Being fully aware of Opal’s cash position, the first action of RBS’s lawyers was to file a security for costs claim against Opal to attempt to have the claim stopped.”
He has instructed the London office of US law firm Quinn Emanuel to act on the case.
