Deutsche Annington closes in on GRAND-stand finish

Deutsche Annington is nearing the finish line in securing the approval of bondholders to refinance almost €4.5bn in CMBS debt across the next five years.

Yesterday afternoon, Deutsche Annington, through its CMBS securitisation vehicle, confirmed that 44% of bondholders had subscribed to its detailed refinancing proposals, to extend €4.39bn in maturing debt, which is secured by more than 160,000 multi-family residential homes throughout Germany.

Deutsche Annington, owned by private equity firm Terra Firma which is seeking a Spring 2013 IPO for its subsidiary, requires 75% of debt investors in the giant CMBS – German Residential Asset Note Distributor (GRAND) – for its refinancing terms to be approved.

CoStar News wrote an analysis of the GRAND refinancing proposal here.

An “early bird” offer remains open for the next three weeks, until November 15, offering bondholders which subscribe to the terms of the agreement with an additional one-off 20 basis points on their outstanding balance.

While there are still almost a third of all bondholders yet to subscribe to Deutsche Annington’s proposals, which is advised by Blackstone, the resistance to the detail thus far has been slim in significance.

This has been, and remains, both an economic and corporate-political consideration for all involved, not least in respect of the interests of some bondholders which are also institutions pitching for the Deutsche Annington IPO mandate.

Representing around 15% of noteholders, Capita Asset Services, the primary loan servicer for the GRAND CMBS, issued a statement one month ago that there was “a desire for improvements” around, inter alia, margin increases and amortisation targets.

The objections were not significant in volume and the necessary support is expected to be reached within the three-week “early bird” period, before the two required approval court hearings on 23 November and 14 December.

Assuming the proposals are passed and ratified through the “scheme of arrangement” process, the next intriguing piece of the GRAND jigsaw is the separate refinancing targets.

Deutsche Annington is targeting five staggered annual refinancings, beginning with €1bn next year, followed by €700m in 2014, €650m in the following two years, and the balance in the fifth and final year.

The first €1bn target will be concluded between 20 January 2013 and the same date and month of the following year.

Within that 12-month period, €1bn will be sourced through three likely channels; Germany’s pfandbrief and landesbanks; insurance companies, pension funds and the emerging debt funds; and CMBS – agency-style or otherwise.

The latter of the three is the most eye-catching of refinancing strategies.

CoStar News understands that this has been a serious consideration long before the successful closure of Florentia, born of a similar German multi-family CMBS refinancing requirement, revealed first by CoStar News.

Several investment banks have considered the capital markets route for GRAND, but perhaps the most plausable is the one among the Ad-Hoc Group, JPMorgan. Time, as it always does, will tell.

About CoStar News

Finance Editor, CoStar News
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