Proposed refinancing, amendment to Articles & Circular

To: RNS From: UK Commercial Property Trust Limited Date: 5 March 2015 UK Commercial Property Trust Limited Proposed refinancing, amendment to the Articles and publication of a circular Introduction and background UK Commercial Property Trust Limited is a closed-ended Guernsey registeredproperty investment company which is listed on the Official List of the UKListing Authority. The Company's investment objective is to provideShareholders with an attractive level of income together with the potential forcapital and income growth from investing in a diversified UK commercialproperty portfolio. The Group has an £80 million term loan facility with Lloyds Bank plc, which isrepayable in June 2015. The Group also has in place a seven year £150 millionterm loan facility with Barclays Bank plc which is repayable in May 2018. Bothof these loan facilities are fully drawn down. The Board has been reviewing therefinancing options for the Group with its Investment Manager and otheradvisers. The Board is pleased to announce that the Group is in advancednegotiations to refinance the Lloyds Facility through a 12 year term loanfacility with a new lender and has agreed terms for the amendment and extensionto the Existing Barclays Facility. The Articles require the Board to put to Shareholders an ordinary resolutionapproving the continuation of the Company at the annual general meeting of theCompany to be held in 2016 and on a five yearly basis thereafter. In the lightof the proposed Refinancing, the Board is proposing a special resolution toamend the Articles to replace the current continuation vote with a vote in 2020and seven yearly thereafter. The Company has today sent a circular to its Shareholders (the "Circular") inconnection with the proposed Refinancing convening an extraordinary generalmeeting of the Company to consider the special resolution to amend the Articlesand thereby approve the continuation of the Company. The Circular also explainswhy the Directors believe that these proposals are in the best interests of theCompany and Shareholders as a whole and recommends that Shareholders vote infavour of the Resolution. New financing arrangements New term loan The Group is in advanced negotiations with a new lender to provide a 12 yearterm loan facility (the "New Facility") which will be repayable in 2027. TheNew Facility will be drawn down through FinanceCo, a new intermediate holdingcompany of the Group which will hold the UKCPH Subsidiaries, and used to repaythe existing Lloyds Facility. FinanceCo is expected to enter into a facility agreement with Cornerstone RealEstate Advisers Europe LLP, a member of the MassMutual Financial ServicesGroup, reflecting the agreed outline terms. Under the facility agreementFinanceCo will drawdown £100 million to finance the repayment of the LloydsFacility. The balance of the New Facility will be used for general workingcapital purposes. The availability of the New Facility will be subject to thelegally binding facility agreement being executed and on a number of conditionsprecedent including valid security and guarantees being granted over the assetsof FinanceCo and the UKCPH Subsidiaries including floating charges and fixedlegal charges over the properties at (i) Junction 27 Retail Park, Birstall,Leeds, (ii) Aberdeen Gateway - Sites A, C2 and D1, Aberdeen, (iii) 81-85 GeorgeStreet, Edinburgh, (iv) Broadbridge Retail Park, Horsham, (v) Motor Park,Portsmouth and (vi) Emerald Park East, Bristol only. There will be a processunder the terms of the New Facility for substitution of the secured properties.The New Facility will not be secured over the other assets of the Group. Interest is expected to be payable on the New Facility at a rate in the rangeof 1.25 to 1.45 per cent. per annum over the relevant 12 year UK Gilt. Based onUK Gilt rates as at 3 March 2015 (being the latest practicable date prior topublication of the Circular) it is estimated that the total interest ratepayable under the New Facility would be between approximately 3.31 and 3.51 percent. per annum. If all or any part of the New Facility is repaid prior to the end of 2026,FinanceCo will be required to pay an early repayment penalty (being an adjustedSpens penalty) based on the greater of (i) a specified percentage of the amountprepaid (being 1 per cent. up to the ninth anniversary of drawdown and 0.5 percent. any time thereafter); and (ii) an adjusted redemption premium based on UKGilt yields on the date of prepayment and the interest which would have beenpayable for the balance of the loan. Accordingly, a higher repayment penaltywill be suffered the earlier the New Facility is repaid and/or if interestrates are lower at the time of repayment. While the level of UK Gilt yields infive years time cannot be accurately predicted, it should be noted that anyearly repayment penalty would be substantial in an environment of unusually lowyields. The New Facility is expected to contain covenants, warranties and undertakingswhich are customary for a term loan facility of this nature. Amendment to the Existing Barclays Facility In addition to the refinancing of the Lloyds Facility, the Group has agreedheads of terms with Barclays for an extension of the term of the ExistingBarclays Facility to 2020 (the "Extended Barclays Facility") and the provisionof a five year additional revolving credit facility (the "Barclays RevolvingCredit Facility") of up to £50 million (together the "New BarclaysFacilities"). The Group expects to enter into an amended facility agreement indue course with Barclays substantially reflecting the heads of terms agreedwith Barclays. Interest is expected to be payable on the Extended Barclays Facility at therate of 1.5 per cent. per annum over LIBOR, a reduction of 0.2 per cent. fromthe Existing Barclays Facility. It is expected that the Extended BarclaysFacility will contain covenants, warranties and undertakings which are the sameas or substantially similar to the Existing Barclays Facility. The Barclays Revolving Credit Facility is to be available for general purposesand may be utilised to fund the acquisition of assets anywhere in the Group.The facility introduces flexibility to the debt structure as it will allowaggregate debt to be increased or decreased depending on the InvestmentManager's view of the property market and ongoing cash levels within the Group.It will also provide the Investment Manager with additional finance that can beutilised in a quick and efficient manner should acquisition or asset managementopportunities arise. Gearing policy In accordance with the Company's investment policy, gearing may not exceed 65per cent., calculated by borrowings as a percentage of the Group's totalassets. However, it remains the Board's intention that borrowings of the Groupat the time of drawdown will not exceed 25 per cent. of the total assets of theGroup. Group borrowings Following the Refinancing, the Group will have available borrowings of £300million of which £250 million will be drawn down. On the basis that theBarclays Revolving Credit Facility is undrawn, the weighted average period tomaturity on the Group's debt will be 7.8 years (being an increase of 5.6years). Based on the total assets of the Group as at 31 December 2014, suchborrowings would represent 18.7 per cent. of the Group's total assets. The current weighted average interest rate is 3.85 per cent. per annum. Theweighted average interest rate post completion will depend on the underlyinginterest rates at the date of completion and the swap strategy the Companyemploys in relation to the current interest rate swaps it has in place.However, based on (i) the New Facility which will be at a fixed interest ratewith a margin expected at a rate of 1.25 per cent. to 1.45 per cent. per annum;(ii) the crystallisation of the swaps in respect of the repayment of the LloydsFacility; and (iii) the potential restructuring of the existing interest rateswaps on the Barclays Facility (which will be decided on nearer the time ofcompletion), it is expected that the weighted average interest rate on theCompany's entire borrowings will fall. As at 31 December 2014, the Lloyds andBarclays swaps were valued at having a break cost of £760,000 and £7,507,000respectively. These liabilities have been fully reflected in the 31 December2014 net asset value of the Company announced on 12 February 2015. Key attractions of the Group The Directors believe that continuation of the Company is in the best interestsof Shareholders for the following reasons. * The Group has performed well since its launch in 2006 delivering strong annualised performance. * The Company remains one of the most highly rated companies in its sector and its shares continue to trade at a significant premium to NAV per Share. * The Property Portfolio is well positioned to continue to out-perform the wider UK commercial property market over the medium and longer term. * There are a number of asset management opportunities in the Property Portfolio that will assist in the performance of the Group over the forthcoming years. * Following the Refinancing, the Group will have in place cost effective long term borrowings which are expected to enhance returns to Shareholders over the longer term. Continuation vote The Articles require the Board to put to Shareholders an ordinary resolutionapproving the continuation of the Company at the annual general meeting of theCompany to be held in 2016 and five yearly thereafter. Given the potentialliabilities incurred on repayment of the New Facility during its term, theCompany would prefer to align the continuation votes with the debt repaymentdates. In the light of the proposed Refinancing, the Board is proposing thatShareholders approve the continuation of the Company by agreeing to a specialresolution to amend the Articles to replace the current continuation vote witha vote in 2020 (being the expected repayment date of the New BarclaysFacilities) and seven yearly thereafter (i.e. 2027 being the expected repaymentdate of the New Facility). Accordingly, there will be one continuation vote during the proposed term ofthe New Facility. Shareholders should note that if the New Facility is repaidprior to the end of 2026, an early repayment penalty will be payable asdescribed above. The Board believes that it is in the best interests ofShareholders to secure long term financing, with a mixed maturity profile, atcurrent attractive interest rates notwithstanding the requirement to hold acontinuation vote during the term of the New Facility. Discount control The Board intends to continue to use the share buyback authority granted ateach annual general meeting to purchase Shares (subject to the income and cashflow requirements of the Company) if the price of a Share is more than five percent. below the published Net Asset Value for a continuous period of time. In the event that such discount is more than five per cent. for 90 consecutivedealing days or more, the Directors will convene an extraordinary generalmeeting of the Company to be held within three months to consider an ordinaryresolution for the continuation of the Company. In considering whether topropose a continuation vote in times of market volatility, the Board mayconsider estimated Net Asset Values between the published quarterly Net AssetValues. If this continuation resolution is not passed, the Directors willconvene a further extraordinary general meeting of the Company, to be heldwithin six months of the first extraordinary general meeting, to consider thewinding up of the Company or a reconstruction of the Company which offers allShareholders the opportunity to realise their investment. If such continuationresolution is passed, this discount policy, save in respect of share buybacks,would not apply for a period of two years thereafter. If the Company is woundup during the term of the New Facility, the early repayment penalty noted abovewould apply. Shareholder meeting If the Resolution is passed by Shareholders at the General Meeting, therequirement on the Directors to hold a continuation vote at the annual generalmeeting in 2016 will be removed from the Articles and replaced with acontinuation vote in 2020 (being the expected repayment date of the NewBarclays Facilities) and seven yearly thereafter. The General Meeting has been convened for 10.00 a.m. on 31 March 2015, to beheld at Trafalgar Court, Les Banques, St. Peter Port, Guernsey GY1 3QL. AllShareholders are entitled to attend and vote on the Resolution to be proposedat the General Meeting. If the Resolution is not passed, the Directors will consult with Shareholdersin advance of the Refinancing and put to Shareholders an ordinary resolutionfor the continuation of the Company at the annual general meeting of theCompany to be held in 2015. Phoenix Life Limited, the Company's largest Shareholder with a holding of53.2 per cent. of the issued Shares, has irrevocably undertaken to vote infavour of the Resolution. Circular A copy of the circular has been submitted to the National Storage Mechanismandwill shortly be available for inspection athttp://www.morningstar.co.uk/uk/NSM . Definitions Terms used and not defined in this announcement have the meanings given inthe Circular. All enquiries: Robert Boag / Graeme McDonald, Standard Life InvestmentsTel: 0131 245 3272 /0131 245 3151 Edward Gibson-Watt / Oliver Kenyon, J.P. Morgan CazenoveTel: 020 7742 4000 Richard Sunderland /Claire Turvey/Clare Glynn, FTI ConsultingTel: 020 3727 1000