Intu shopping refinances debt

Intu Properties, the re-branded Capital Shopping Centres Group, is refinancing four UK shopping centres with £1.15bn of debt comprised of a sterling bond issue, fresh bilateral bank debt and a bridge facility. 

The four wholly-owned shopping centres are intu Lakeside, intu Braehead, intu Watford and intu Victoria Centre, and together are valued at a combined £2.3bn.

This takes the refinancing to 50% LTV, which is slightly reduced leverage from the existing 56.6% LTV, based on the existing seperate debt facilities for each of the four shopping centres, which amounts to £1.3bn.

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.

Intu will contribute around £200m, from existing cash and facilities, to fund the balance of the refinancing on the existing debt secured on the assets as well as to fund the estimated £60m to £70m swap break costs and transaction costs.
The bridge facility is anticipated to be refinanced through further capital markets issues as market conditions allow, while the bond roadshow will commence on Monday 4 March and the bank debt, which has already been signed, will come into effect when the bonds are issued.

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 ompany’s medium-term average cost of funding, albeit after an initial marginal increase due to cystalising 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 ongoing basis alongside bank debt, diversifying sources of debt and lengthening loan maturities.

Intu said the blended £1.15bn refinancing “balances flexibility with lender andbondholder credit protections”. For Intu, there is operational flexibility to contributute 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 chose 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.
The announcement was one of a flurry of major announcements from Intu Properties this morning as it unveiled its full year results, chief among them an equity raising to fund a large shopping centre acquisition.