Gherkin Lenders Win Ruling in Interest Rate Swaps Case

A U.K. judge ruled Germany’s Landesbank Hessen-Thueringen Girozentrale, known as Helaba, and other lenders should be paid ahead of Bayerische Landesbank for loans to the owners of London’s Gherkin skyscraper.

BayernLB had argued that about 140 million pounds ($238 million) due under an interest-rate swap should take priority over the 400 million pounds in loans owed to the larger group of lenders. Judge Julian Flaux in a ruling today disagreed, saying all the lenders had taken risks.

There appears to be no “compelling reason” for giving BayernLB priority for taking risks as hedging lender “when all the lenders are taking a much more substantial risk by making the loan,” Flaux wrote in his ruling.

The cucumber-shaped skyscraper at 30 St. Mary Axe went into receivership last month after loan terms were breached. Buildings in receivership are typically sold to pay debts. Evans Randall Ltd. bought the tower for 600 million pounds in 2007 with a fund managed by Germany’s IVG Immobilien AG.

The building has tenants including Swiss Re AG and Standard Chartered Plc. The Gherkin was valued at 473 million pounds to 510 million pounds in 2012, IVG said last year.

David Capps, a lawyer for BayernLB at Ashurst LLP, declined to immediately comment on the ruling.

The case is Landesbank Hessen-Thueringen Girozentrale & Ors v. Bayerische Landesbank & Anr, High Court of Justice, Queen’s Bench Division, Commercial Court, 13-1611.

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