Developer Noel Smyth's £200m (€230m) Alburn bond, which is secured on a UK investment portfolio, has breached its loan-to-value covenant after the value of its portfolio dropped 44% to just over £139m.

The covenant breach has not been remedied causing a "loan event of default", according to a stock exchange announcement on Friday. The properties had a market value of more than £250m in 2007.

Smyth said that all sides were working on a co-ordinated response, and that a proposal had been drawn up by Alburn in relation to the bond and this would be voted on by the noteholders."The proposal is that £50m of the properties be sold before the realisation of the loan which is in four years' time", adding that the sale of those properties would not happen until "it's appropriate to do so".

Other proposals include amending the loan to value ratio covenants and the interest cover ratio covenants, and to have desktop valuations of the portfolio every six months. The borrower will also be required to "pay a consent fee to consenting noteholders upon the amendments taking effect and in 2011 and 2012".

The security is due to mature in October 2013 and legal final maturity of the notes is October 2016.

Alburn's CMBS portfolio comprises 45 properties throughout Britain generating a net income of more than £15.5m per annum from 170 tenants.