Land Securities Group plc announced yesterday a £2.4bn refinancing package that will see existing debt replaced by the issue of new bonds.
The announcement followed a newspaper report over the weekend saying Britain´s biggest property company was looking to launch a 2 bln stg-plus securitisation.
The group, which has 1.8 bln stg of bonds outstanding, said the refinancing would cut its annual interest charge by around 25 mln stg.
'Through this structure, which takes full advantage of the security afforded by our high-quality investment portfolio, we will refinance our historical higher coupon debt in an efficient manner, lower our future borrowing costs and, most importantly, provide improved flexibility in our financing which should benefit all aspects of the business,' said chief executive Francis Salway.
The company is to refinance its 'mortgage debentures and unsecured bonds, through the establishment of a new funding structure.'
At the same time it will refinance all of its unsecured bank debt with a new facility within this structure.
Under the proposals, Land Securities will invite current noteholders to exchange their existing debt for up to about 2.4 bln stg of new bonds to be issued by Land Securities Capital Markets PLC.
The new bonds will be secured against an asset pool which, at the time of the proposed exchange, is expected to include about 6.2 bln stg of the group´s total investment portfolio.
At the same time, the group has entered into an agreement with Barclays, Citigroup and Lloyds Bank to underwrite a secured five-year 1.5 bln stg bank facility as part of the new structure.
'The new bonds will have a higher total nominal value but a lower interest rate than the notes they replace, reflecting current market pricing,' the group said in a statement.
'As a result, the group´s annual interest charge will reduce by approximately 25 mln stg.'
Land Securities added it will incur an exceptional accounting charge against pretax profits in the year to March 31, 2005, mainly reflecting the increase in the nominal value of the group´s debt.
If the transaction had concluded on Sept 22 2004 this charge would have been about 659 mln stg, although the actual charge will be determined by interest rates near the transaction closure.
A Special Committee of the Association of British Insurers, representing about 37 pct of outstanding notes, said they have accepted the proposals.