Kier Group, the construction and property group, has closed only of the first UK commercial property loans which has been funded under the government’s Funding for Lending Scheme (FLS), closing a four-year unsecured £30m senior facility with Lloyds Banking Group.
This is understood to be only the second commercial real estate loan drawn by Lloyds’ Commercial Banking division under the FLS scheme, after the bank drew down a further £2bn under the scheme before Christmas, taking its total capacity to £3bn.
FLS was introduced by the UK government last August to stimulate more lending, predominantly to households and small businesses.
Lending for commercial real estate is only expected to be a marginal contributor, but the incentive remains for both sides: as banks are able to source cheaper capital, while borrowers can get access to lower margin debt.
Just before Christmas on 20 December, Kier Group also issued a seven-year and 10-year notes in aggregate principal amounts of £45m and $28m in four series, with coupons ranging from 4.2% to 4.8% per annum.
The notes will be used to refinance Kier’s existing £17m 6.4% notes and $22m 6.2% notes, which mature on 19 February 2013, and for continued investment in Kier’s property development pipeline.
Haydn Mursell, group finance director of Kier, said: “We are delighted with the strong support shown by investors for our private placement, which confirms Kier’s solid financial position and the market’s confidence in the group’s future prospects.”
The private placement and the FLS loan increase Kier’s available funds and have further diversified the group’s sources of funding.
Mursell added: “The FLS clearly indicates that the UK government is committed to supporting infrastructure projects as a means of moving the UK economy out of recession.
“As a result of this loan and the projects it will finance, our supply chain will also benefit, demonstrating the FLS’ importance to the UK in general. We are also grateful to Lloyds for its continued support to Kier and the construction sector.”
Among the 35 participating banks in FLS are Royal Bank of Scotland, Santander, Barclays and Nationwide.