Intu raises £280m equity and tees up £1.15bn hybrid refinancing (updated)

Intu Properties, the rebranded Capital Shopping Centres Group, has raised £280m today through an equity placing and is set to launch a sterling-denominated corporate bond on Monday as part of a £1.15bn hybrid refinancing strategy for four of its UK shopping centres.

Screen shot 2013-02-27 at 19.48.50The £280m of capital raised is, in part, to cover the cost of acquiring Midsummer Place Shopping Centre in Milton Keynes from Legal & General Property for £250.5m, through the issuance of 86m in new ordinary shares at 50 pence at a price of 325 pence and 43.6335 rand, reflecting 9.9% per cent of Intu’s issued share capital.

Bank of America Merrill Lynch (BAML), UBS and HSBC Bank, Intu’s joint advisers across the equity raising and debt refinancing, are also launching the refinancing of four of Intu’s rebranded shopping centres – intu Lakeside, Braehead, Watford and Victoria Centre – valued at a combined £2.3bn in a three-part debt strategy.

The three banks will begin the corporate bond roadshow on Monday, which will close in two weeks, after which the balance to meet the £1.15bn target will be made-up in a senior lending syndicate – already arranged – and a bridge loan, with the latter possibly issued as a corporate bond later.

While Intu declined to give guidance as to the targeted size of the corporate bond, the sterling issuance is likely to form the majority of the total £1.15bn financing package as it commands a lower coupon relative to bank finance.

The balance will be made up from the lending syndicate and the bridge facility, with BAML and HSBC thought to be possible lenders in the senior syndicate, CoStar News understands.

The £1.15bn refinancing of the four Intu shopping centres reflects an almost £200m of de-leveraging against the assets, funded from existing cash and facilities, although Intu will crystallise £60m to £70m in early swap break costs.

Following the refinancing, the LTV against the four shopping centres will be at 50%.

Intu is arranging the refinancing through a new debt funding platform, the secured group structure (SGS), a special purpose vehicle for issuing investment grade secured debt which will become a central source of financing for Intu.

All debt within the SGS will be ranked pari passu.

The establishment of the SGS therefore will achieve a refinancing and maturity extension on about one third of the group’s debt and over 55% of Intu’s debt that is falling due within the next three-to-five years.

Intu said it anticipates the new debt issued through SCS will lower the company’s medium-term average cost of funding, albeit after an initial marginal increase due to crystallising swap breakage costs which will reduce adjusted, diluted NAV by circa 7p.

SCS is structured to issue debt capable of being assigned an ‘A’ category rating, ensuring ready access to medium and long-dated bond and private placement markets on an on-going basis alongside bank debt, diversifying sources of debt and lengthening loan maturities.

Intu said the blended £1.15bn refinancing “balances flexibility with lender and bondholder credit protections”.

For Intu, there is operational flexibility to contribute additional or substitute assets as well as issue further debt and fund development capex, while for creditors there is now a range of debt products to choose to invest in as well as a tiered covenant regime.

Matthew Roberts, finance director of Intu Properties, said: “We are pleased to announce the establishment of a vehicle for issuing investment grade debt which will become a central financing platform for the group.

“This robust and flexible platform diversifies the group’s sources beyond the banking markets and brings the considerable benefits of ready access to debt markets through an investment grade rating, access to longer maturities and ability to issue a range of instruments at competitive margins.”

The four Intu shopping centres have a combined retail space of 4.3m sq ft and an annual footfall of around 80m people.

Rothschild acted as financial adviser to Intu in respect of the equity placing.

About CoStar News

Finance Editor, CoStar News
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