Deutsche Annington has confirmed it is to drawdown €2.3bn of the bridge loan with JPMorgan and Morgan Stanley, as well as the already lined up €940m from fresh consortium of pfanbriefbank and insurance lenders, to repay the entire outstanding €3.2bn GRAND CMBS to noteholders next Wednesday.
The acceleration of the repayment schedule follows revised plans by Terra Firma, the private equity firm which owns Deutsche Annington, to list a slimmed down stake in Germany’s largest residential property company last Tuesday, after its original 25% stake floatation failed following the withdrawal of two key investors.
JP Morgan and Morgan Stanley agreed to provide a €2.5bn bridge loan, which will later be structured as a corporate bond linked to Deutsche Annington’s BBB corporate rating, as measured by Standard & Poor’s.
With a separate €940m of fresh financing agreed with a club of lenders – and Deutsche Annington having raised the required €400m in gross proceeds from last week’s IPO – €2.3bn of the potential €2.5bn has been drawn, enabling the accelerated repayment to bondholders in time for next Monday’s interest payment date (IPD).
Deutsche Annington has reconfirmed its intention to refinance the JPMorgan and Morgan Stanley bridge loan through the issuance of unsecured bonds and is currently conducting investor meetings in preparation of an issuance.
By issuing a corporate bond, Deutsche Annington opens up to a wider universe of investors, compared to Europe’s still relatively shallower returning CMBS investor base.
Corporate bonds are also considered overall easier to execute, in terms of regulatory compliance with no 5% “skin in the game” Capital Requirements Directive (CRD) requirements, and broadly speaking, there is a more efficient relationship with end debt investors, with no master servicer required.
This early-than-expected repayment could prove to be good news for Gagfah’s €2bn German Residential Funding 2013-1 CMBS, for which there is understood to be still some unplaced bonds, as the return of capital to former GRAND noteholders will likely require at least some to redeploy.
In January, Deutsche Annington secured €786.6m fresh debt, including €656.6m from Berlin Hyp, in what became the first milestone in a rapid, if not entirely smooth, mammoth refinancing in Europe, with more than €4bn in fresh financing secured since the turn of 2013 to refinance Europe’s largest-ever CMBS.
JP Morgan and Morgan Stanley are Deutsche Annington’s joint global co-ordinators and joint bookrunners.