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Caltongate development under threat after financial problems

Mountgrange Capital, who are now in administration, said the withdrawal of bank funding for the £300million Caltongate scheme was responsible for the uncertainty.

The future of a major building development in Edinburgh's historic Old Town is uncertain after the company behind the project went into administration.

Mountgrange Capital said the withdrawal of bank funding for the £300million Caltongate scheme was responsible for the move.

The company's directors are now investigating whether they can buy the firm's assets out of administration.

Mountgrange spokesman Mark Cummings said the development, which includes plans for a five-star hotel and conference centre and 200 new homes, would be "impaired" after Halifax Bank of Scotland pulled out of a loan deal, forcing them to call in administrators, Deloitte.

He said: "In the last two weeks, a change in attitude has been forthcoming from our bankers, and that has led to us having to take this course of action, because their support has dropped away.

"In terms of our ability as a company to make good on the Caltongate development, that will be impaired in the short term, certainly, going forward."

He added that the situation was "systemic" of the current, wider relationship between the commercial property sector and banking sector.

Mr Cummings said Mountgrange Capital suffered a loss last year after they had to write-down the land value of the Caltongate site - a measure, he said, dictated by the economic slump.

He said the company had a "strong desire" to take the assets out of administration.

"We have already indicated that we are likely to look at the opportunity of taking the assets that have gone into administration out of administration," he added.

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