Intu Properties, the UK’s largest shopping centre owner, is proposing to increase its £1.15bn Intu (SGS) Finance bond programme by a further £350m to refinance to shopping centres, intu Derby and intu Chapelfield, in the first tap issue for the funding programme was launched 18 months ago.
The roadshow begins tomorrow at which Intu will determine the duration of the bonds, which are likely to be 10 years or longer.
Intu Properties’ secured group structure (SGS) funding platform provides the REIT with flexibility to raise debt of various types secured on ring-fenced collateral up to a program limit of £5bn.
The refinancing of intu Derby, acquired from Westfield in March for £387.5m, relative to a then valuation of £390m, will repay a £202.5m two-and-a-half year loan provided by Lloyds Bank and UBS. In the six months to 13 October, intu Derby’s value has risen 7.4% to £419m.
The refinancing of intu Chapelfield, which was revalued at £260m at the same mid-October date, refinances a £204.9m Barclays Bank loan, which was scheduled to mature in April 2016.
The four shopping centres are the existing collateral security for Intu’s SGS’s bond programme – Lakeside (£1.25bn), Braehead (£580m), Watford (£335m) and Victoria Centre (£304m) – are together valued at £2.467bn.
In addition to Derby and Chapelfield, together valued at £679m, the aggregate value of the six malls is now £3.146bn.
Assuming existing Intu (SGS) Finance bondholders ratify the proposed transfer of the Derby and Chapelfield shopping centres into SGS, the total outstanding debt will increase to £1.502bn representing an LTV of c.48%.
The existing bonds and the new bonds are expected to be rated A(sf) by Standard & Poor’s. UBS and Lloyds Bank will be acting as joint bookrunners.
On Friday, Intu Properties closed a place a seven-bank, five-year £600m revolving credit facility (RCF) with existing relationship banks: Bank of America Merrill Lynch, Credit Suisse, HSBC, Lloyds Banking Group and UBS.
In addition, two new banks joined the club RCF: Barclays Bank and the Royal Bank of Scotland. The new RCF replaces the existing £375m facility that was due to expire in November 2018.
The margin on the new RCF, which is linked to different gearing levels, has reduced by between 25 and 50 basis points compared to the existing facility and has an initial margin of 140 bps over LIBOR.
Taking into account the lower margin, and a lower commitment fee which has been agreed, the new facility will have a lower all-in cost based on expected utilisation levels despite the larger facility size.
The new RCF facility has a minimum term of five years out to October 2019, with a two-year extension option subject to certain undisclosed conditions.
In August, Intu and Land Securities refinanced the 1.4m sq ft St David’s shopping Centre, owned 50:50, with a £163.2m seven-year combined term loan and RCF with Wells Fargo.
The dual facility is split £122.5m term loan and a £40.7m committed RCF, which was undrawn at the time of the refinancing in August. Pricing on the term loan is understood to be just above 150 bps, reflecting a slight premium for the shareholding rather than direct mortgage-backed security.