Banks are threatening to seize the troubled Canary Wharf project in London and shut it down until business conditions improve.

"You could freeze it at relatively little cost and spend money when there was a prospect of a payback," said a senior banker familiar with the troubled east London business center, owned by Olympia & York Developments Ltd.

Mothballing was one of the options being considered by the 11 banks to Canary Wharf as they met Monday with British court officials overseeing a reorganization of the project.

$12.5 Billion Lent

Banks including Chemical Banking Corp and Citicorp who have lent nearly $12.5 billion to Canary Wharf.

The group opposed conditions attached to an offer by a group assembled by Olympia's Paul Reichmann, the banker said.

The group, which includes U.S. financiers Lewis Ranieri, Larry Tisch, and Sandy Weill, has offered $350 million for the development.

The investors would displace the banks in line for security and retain a large equity portion in the potentially profitable later stages of Canary Wharf.

"The offer is so hedged with conditions unfavorable to the banks, the banks are inclined to say |If this is the best you can do, we can do it ourselves,'" the banker said.

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