The company controlling London’s Canary Wharf financial district has been ordered by a U.K. court to pay bondholders 169 million pounds ($242 million) in compensation for redeeming debt early.
Canary Wharf Finance II Plc, a unit of Canary Wharf Group Plc, has made a provision for the payment but plans to appeal the decision, according to a company statement on Thursday. Canary Wharf bought 577.9 million pounds of Class A1 securities in July 2014 with proceeds from the sale of 10 Upper Bank Street, one of the properties previously backing the debt.
Canary Wharf asked a U.K. court more than a year ago to rule whether it had to make the payment. Non-payment would challenge a U.K. bond market convention from the 1980s known as the Spens clause. That requires borrowers to compensate investors for redeeming notes early by making up for the money they would have otherwise received if they held the debt to maturity. Pension funds and insurance companies that buy long-dated securities to match the maturity of their liabilities rely on the clause to avoid losses.
“The concept of Spens has been upheld, which is very good news for bondholders,” said Natasha Harrison, managing partner of the London office of Boies, Schiller & Flexner LLP, which represents the bondholders. “The payment was designed to protect bondholders and their long term investments.”