The wholly-owned subsidiary of the council has also unveiled in its latest accounts a drop of more than £20m from the company’s net worth, as the economic downturn and credit crunch took its toll on the business.
In a year in which EDI breached its banking covenants, the company saw the value of its net assets plummet to £17.6m during the 2008 calendar year, compared with £38.5m – its second successive year of multi-million-pound write downs.
The accounts, obtained by The Herald from Companies House, also revealed EDI had plunged into a pre-tax loss of £5.8m during the year.
This is compared with a pre-tax profit of £1.8m the year before. Turnover dipped to £5.9m, compared with £6m in 2007.
EDI, which built and sold the Gyle Shopping Centre and is currently involved in a number high-profile projects in the capital, including the £200m regeneration of Edinburgh’s Craigmillar area and a plan to turn Lamb’s House in Leith in flats, last year celebrated its 20th anniversary.
Until the slump took hold, it had been a cash cow for the council.
However, like other property-focused enterprises, the company, which has cut staff numbers to 13 from 31 amid the crisis, has been hammered by the credit crunch as property prices and investment values fell off a cliff.
Earlier this year, it emerged the company had breached its loan-to-value covenant with Lloyds Banking Group, as its land values plummeted and the lender began to seek higher interest rates to reflect the increased risk on the outstanding loans.
A spokesman for the council yesterday said: “Negotiations with EDI’s main lender, Lloyds Banking Group, have been protracted. While the bank rejected the council’s initial offer, they are reconsidering their position.”
But he also said that a meeting had been held with the bank on November 2 “to establish if an agreement could still be reached”.
However, he did not comment on the outcome of the meeting.
EDI said it was “investigating” further “loan and company restructuring options … with the aim of establishing the most appropriate, sustainable solution”.
Earlier this year, the council launched a £70m bailout of its struggling property subsidiaries, with a plan to buy up the property assets of Waterfront Edinburgh and Parc Craigmillar, along with developer EDI. However, EDI, which saw the value of its investment portfolio tumble by 25% over the course of last year, said that the sale “would not enable the full liability to the bank to be repaid”.
The spokesman added: “There is the potential to sell further assets in order to improve the overall cashflow position.”
However, he was not specific about what those assets might be.
The company, whose first project was the development of Edinburgh Park, noted in its accounts: “Instead of celebrating our 20th anniversary with another positive performance, the result is a disappointing loss.
“In common with the rest of the property world, we faced plummeting investment values, curtailed bank lend and collapsing residential demand.”
The spokesman added: “From a position where EDI was projected to run out of cash in October 2009, with a requirement for further council funding to keep the company afloat, the cash flow now shows a more positive balance through to June 2010 with no requirement for council funding over this period.”
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