Bruntwood, the North West-focused property company, has submitted a proposal to bondholders to repay £123.05m of securitised debt in exchange for uplifts on the Bruntwood CMBS bond coupons and a two-year extension of the Bruntwood Estates Loan, which matures next January.
The CMBS restructuring proposals, for which Cairn Capital is the adviser, are part of wider refinancing ambitions for Bruntwood, which also includes negotiations to refinance the maturing three-bank £165m revolving credit facility with RBS, HSBC and Barclays.
Under the securitised debt restructuring proposals, the currently outstanding £432.5m CMBS debt would see £123.05m repaid early, which will be partly funded by a £120m 10-year loan which was extended by Legal & General Investment Management as well as the sale of the circa £4m-valued Edmundson House.
In exchange for two-year loan extension for the Bruntwood Estates Loan to January 2016, Michael Oglesby’s North West property company will increase the coupons on the Bruntwood CMBS by 60 basis points until next January, thereafter, up to: 3% for the class As; 4.5% for the class Bs; and 7% for the class Cs.
The restructuring would require an extension of the legal final maturity of the notes to January 2019.
RBS has stepped aside as loan servicer, to allow Bruntwood and Cairn Capital to call a special resolution at an EGM on Tuesday 19 February 2013.
Bruntwood has 100% support of an Ad-Hoc committee of bondholders which represent 72% of all bondholders.
“The Bruntwood Group is seeking an early partial refinancing to mitigate the risk posed by the concurrent maturity of its debt and to provide certainty over the future financing of the Bruntwood Group,” wrote Chris Oglesby, chief executive officer at Bruntwood Group in the proposal to bondholders.
Over the course of the two-year extension, Bruntwood Group intends to de-leverage its property portfolio.
Oglesby wrote that the “extension of the final maturity date of the remaining notes will enable the Bruntwood Group to conduct a program of de-gearing through a series of controlled disposals, which will reduce the remaining notes to a re-financeable LTV level which is expected to be 59% in January 2016,” based on the September 2012 revaluation.
“The de-leveraging of the Bruntwood Group will allow it to engage in an orderly refinancing of its remaining debt and ensure that the noteholders will mitigate the risk of not recovering their investment in the remaining Notes,” continued Oglesby.
Bruntwood’s £120m 10-year LGIM senior loan reflects a 65% LTV, priced at around 300 basis points over three-month LIBOR, and is secured by five properties – valued at £185m – from the outstanding £203.4m Bruntwood Estates Alpha Loan.
Kevin Crotty, CFO of Bruntwood, said: “In negotiating the extension of part of our CMBS, we have been heartened to see that there is still strong demand in the market for bonds which are backed by a recognised sponsor, secured on a performing portfolio.
“Far from being dead, it would appear that the CMBS market could yet play an important part in providing investors with strong running yield and help the commercial property market address its major debt cliff issue.
“We are well advanced with the final stage of our group refinancing and are in positive on-going discussions with our club of banks – RBS, HSBC and Barclays – about extending and increasing our current £170m medium-term loan facility.”
CoStar Finance 