As the summer neared its end, shareholders, to the immense disappointment of the doomsters who had predicted the end of the world, saw their biggest summer gains in five years with the FTSE 100 forty percent above its March low. Nevertheless, things were not good, unemployment was surging and lending remained weak. Those who had hoped for a quick turnaround there were disappointed.
To the relief of all, another 1930s style Great Depression had been avoided. That did not lessen the anxiety at the Irish Netherlands Bank, where concern was growing over certain of its commercial property loans, more notably those relating to Canary Warf. The bank was part of a pool that had provided an almost nine hundred million pound loan to the Songbird Consortium, sixty percent owner of the Canary Wharf Group. Songbird announced unless it could refinance the loan, repayable in May 2010, it could breach its covenants.
The story of the Canary Wharf development went back to the early eighties, when the American banker Michael Von Clemm, chairman of the bank Credit Suisse First Boston, and the property tycoon Gooch Ware ‘G’ Travelstead, an American property developer and entrepreneur, persuaded the London Docklands Development Corporation and the Government of Margaret Thatcher that a new financial services district, located at the old West India Docks, was viable. They planned to repeat the Boston, Massachusetts, docks redevelopment by the transformation of the Isle of Dogs area in London’s derelict Docklands.
From the outset the project was plagued by a chain of corporate collapses and financial problems. When finally the Canadian developers Olympia and York took over, they too were hit by a recession. But, the project was saved by a new company, the Canary Wharf Group, which in turn was taken over by the Songbird consortium in 2004.
Then came the crisis and the value of City commercial property plunged, as did Songbird’s portfolio. The property company’s liquidation seemed inevitable, threatening the solidity of the Irish Netherlands.
Fitzwilliams, fearing the worst, turned to Tarasov, who was working to form a group of investors that included the China Investment Corporation, a sovereign wealth fund, and Libyan investors.
Canary Warf was not the bank’s only problem. Its Dublin end was involved in a vast one billion euro new town development programme in the Pembroke district to the south of the city. Its developer, Allen Holdings, had announced the project would provide thousands of jobs on completion. The project included offices, leisure facilities, a shopping centre, a multiplex cinema, a bowling alley and what the prospectus described as a family entertainment centre.
The new town, strategically located only fifteen minutes by train from Dublin City centre, fifteen minutes to the airport, was to have provided homes for thousands on completion. In addition the Irish developer had planned a new deep-water port, which he then described as one of the most exciting infrastructure projects to be undertaken in Ireland.
Unluckily for Allen, one year after the debacle caused by the collapse of Lehman Brothers, he was in deep trouble, struggling to keep his head above water, as the aftershocks hit Ireland. Unemployment was surging and public finances in a disastrous state.
‘If things continue like this Pat we’ll have to get into bed with Tarasov.’
Pat nodded, he liked the idea, he liked anything that was unorthodox. The idea of linking up with the Russian opened up vast new fields of opportunity, which to Fitzwilliams’ mind were potential minefields.
‘We don’t have much choice, at least we’re free not like our High Street friends.’
‘New opportunities are always risky Fitz,’ replied Pat reading his mind. ‘In the past people weren’t afraid of exploring new territory. Now it’s others, the Russians and the Chinese who are showing the way.’
‘What’s this I’ve heard about Battersea Power Station Pat?’
‘Battersea Power Station?’ mumbled Kennedy. ‘Real Estate Opportunities is involved…a Dublin Irish firm.’
‘Fuck Dublin,’ snarled Fitzwilliams losing his famous cool. ‘We’re trying to get out of trouble, not into it. We’ve enough trouble with Canary Warf without taking on any more lame ducks.’
Kennedy clamed up, it had been his idea to get involved with the developers, considering the four hundred and fifty acres of space waiting to be built on. The site, a stone’s throw from his apartment, provided a sad panorama and a constant reminder of the opportunity in attendance as he crossed Chelsea Bridge to drive into the City each morning.
The power station had been closed down and stood gutted for as long as he could remember; a casualty of political dithering. Plans dated back to 1981, making it one of London’s longest running property sagas. Only the shell remained, a strange architectural monument in the heart of London. Its rebirth had been launched in the middle of 2008, soon after Kennedy’s Irish friends had completed the purchase of the thirty eight acre site, their eyes fixed on a vast development. Then with the arrival of the crisis its value plunged leaving the overambitious Irish developers in debt to the tune of one and a half billion pounds.
Fitzwilliams had reason to fell glum. A way had to be found out of the mire and as prospects in the UK faded the idea of working with Tarasov’s seemed, like it or not, a possible solution to the impasse. The British economy was surviving on hand-outs. All together the cost of the nation’s rescue, with bank bailouts, capital injections, purchase of frozen assets, guarantees and Bank of England provisions, had reached a barely imaginable one point three trillion pounds, equivalent to over eighty percent of its GDP.
The global economy was not faring much better, with a total of nine trillion dollars, one thousand dollars for every single person on the planet, pumped into its stricken economy.
Britain’s share would weigh heavily on its future.
Chapter 33 AUGUST