New York Life signs £100m private placement with Derwent London

Derwent London has signed terms for a two-tranche £100m sterling-denominated private placement bond with New York Life, taking the central London REITs total unsecured new debt secured in the second half of this year to £800m.

New York Life logoThe unsecured facility is comprised of a £25m for 15 years at a fixed rate of 4.41% and £75m for 20 years at a fixed rate of 4.68%.

New York Life, the US insurance company, will receive a spread of 135 basis points for the 15-year £25m tranche and 142 bps for the 20-year £75m tranche, with each priced over the respective term UK gilt benchmarks. The funds will be drawn in January 2014.

HSBC and Lloyds Banking Group were joint lead co-ordinators for the UK private placement, which initially went out to a tender process to a group of UK and US lenders.

The competition ensured that Derwent achieved price tension for the £100m unsecured facility, which Derwent believes ultimately yielded a sharper price.

With just New York Life as the sole participant in the UK private placement offering, Derwent effectively benefits from an exclusive lender-borrower relationship with just one debt provider thereby establishing a kind of quasi-bilateral loan relationship with a US insurance lender with the benefit of tighter pricing.

In its third quarter results published this morning, Derwent said: “We believe that this latest financing piece provides long-term debt at attractive pricing.”

In addition, New York Life’s covenant requirements are entirely consistent with already agreed terms for its existing bank facilities, including the £550m unsecured five-year revolving credit facility (RCF) with HSBC, RBS, Barclays Bank and Lloyds Banking Group which carries a 160 bps headline margin.

New York Life had cash and invested assets of $180.1bn across a diversified investment portfolio, at the end of 2012, including $33.9bn in private corporate bonds out of a wider fixed income portfolio which accounted for $134.3bn, or 74.5%, of its entire invested capital.

The US insurance giant conducts its own traditional, bottom-up research on individual investments and the underwriting of credit risk, rather than relying on third-party credit ratings, while maintaining strict diversification standards by asset classes, issuers and sectors.

At the end of 2012, 92% of New York Life’s total $134.3bn fixed income portfolio was investment grade, including a $3.6bn allocation to corporate bonds and loans with REITs.

Back in mid-July, Derwent – which issued the first post-global financial crisis new issuance UK convertible bond market after a four-year hiatus in May 2011 – issued a six-year £150m convertible bond with a bi-annually paid coupon totalling 1.125% and a 35% conversion premium.

In total, Derwent’s convertible bond – which was more than nine times oversubscribed – held a 65.4% cushion, based on the pricing at the time the convertible’s launch.

As at 30 September 2013, the Group had £1.25bn of facilities, of which £389m were undrawn, plus £20m of cash.

John Burns, chief executive officer of Derwent London, said: “In the second half we are already making further excellent progress with both our property and financing strategies.

“Our successful refinancing means that we are now even better placed to fund our development pipeline and invest in additional properties.”

jwallace@costar.co.uk

About CoStar News

Finance Editor, CoStar News
Gallery | This entry was posted in Banks, Lenders, Market Trends, Refinancings, REITs and tagged , , , . Bookmark the permalink.

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