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'Greedy bankers' blamed for West property company woes

By Western Morning News  |  Posted: June 22, 2012

Gary Streeter

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Bankers and financiers have been accused of "disgraceful conduct and unbridled greed" over a Westcountry property company's collapse into administration.

South West Devon MP Gary Streeter attacked Royal Bank of Scotland lenders and "senior members" of US venture capital company Blackstone in a House of Commons debate yesterday.

It centred on the growing controversy over allegedly mis-sold interest swap loans, which were recommended by high street banks to thousands of small businesses around the time of the economic crash and have led to many of them hitting the wall.

Plymouth-based business park owner London and Westcountry Estates (LWE), founded and run by Mike and Diane Hockin, was placed into administration in March with a £57 million debt on an interest-swap loan it took out with RBS in 2008.

The loans – which were sold to protect businesses against interest rate hikes – are at the heart of the biggest finance scandal to emerge since the mis-selling of payment protection plans, which have cost the banks millions in compensation.

The complex finance arrangements locked borrowers into the deal – but not the banks. It led to businesses repaying loans at pre-recessionary interest rates, which continued to rise as the base rate fell to an all-time low of 0.5 per cent.

Pressure group Bully Banks has described the loans as "toxic" products that could have led to more than 100,000 UK job losses as a result of debt-led company collapses.

Although LWE kept up with interest payments, commercial property values began to fall.

"A significant variation in the company's loan-to-value calculation meant that it was in technical default of its loan agreement," said Mr Streeter, who said that negotiations with RBS had failed.

In July last year, LWE's debt was among those worth a total £1.4 billion to be bundled up by RBS and placed in its new asset management vehicle. This is administrated by US venture capital company Blackstone, which secured a 25% share of the portfolio's equity.

Mr Streeter told the Commons that LWE's administration had come "as a direct result" of RBS "imposing" on the company an interest swap arrangement "that was never right for their business".

He said: "It was simply a way of [RBS] selling a product to make a profit on which huge bonuses were paid."

The Conservative MP said that the way in which the loan had been sold to LWE "patently breached" financial regulations.

He told the House: "We all know that if companies enter into a bad bargain, that is something they have to accept. But this was not just a bad bargain. The company was mis-sold this hedging product to further the interests of the bank – not the customer – and its detailed and complex terms were never fully explained or understood by the directors of the company.

"These hard-nosed American venture capitalists were not remotely interested in the company's welfare, or its strategic importance to the South West. They were only interested in making as much money as possible from the deal.

"[LWE's] business parks are now being flogged off one by one at a fraction of their true worth. I hope the individual bankers and, in the case of LWE, senior members of Blackstone, feel thoroughly ashamed of their disgraceful conduct and their unbridled greed."

He told the House: "I hope that the family behind London and Westcountry will successfully sue RBS for many millions of pounds."

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