Reichmanns back down over O&Y agreement

(First Edition)

NEW YORK - The Reichmann family of Toronto yesterday backed down from threats to scupper an agreement brokered by Cyrus Vance on control of the US subsidiary of its onetime property empire, Olympia & York, writes Larry Black.

The Reichmanns, who still own 20 per cent of O&Y's US arm despite the bankruptcy of the Canadian parent, had planned to object in a New York court yesterday to the compromise, which designates an independent board to run the subsidiary. Instead they agreed to let the court approve the deal worked out by the former US Secretary of State, exempting a controversial clause that might dilute their stake.

While the US arm is not technically in bankruptcy, it has halted payments on its dollars 7bn debt and its chief executive, John Zuccotti, has been negotiating directly with its lenders. The creditors of O&Y (USA) have insisted on its independence from the administrator of the Canadian parent.

But the Reichmanns and creditors of the Canadian company, represented at the negotiations by the trustee, believe some residual value may remain in the US subsidiary. In their objection, the Reichmanns insisted that any restructuring affect all owners pro-rata.