20th Nov 2006 10:27
British Land Co PLC20 November 2006 20 November 2006 BRITISH LAND PLANS £1.015 BILLION MEADOWHALL REFINANCING REDUCING GROUP INTEREST COST BY £3 MILLION PER ANNUM The British Land Company PLC ("British Land") announces plans for a refinancingof its Meadowhall shopping centre ("Meadowhall")(1) which is securitised throughMeadowhall CMR Finance plc. Meadowhall will be refinanced by a new simplifiedsecuritisation issued by Meadowhall Finance PLC, a wholly owned subsidiary ofBritish Land. The proposed refinancing, which unlocks value for both BritishLand and existing bondholders, is expected to amount to £1,015 million(2). Thenew financing is expected to have a weighted average interest rate ofapproximately 4.9%. The refinancing follows on from the success of, and positive investor receptionto, the similar exercises carried out in March 2005 on British Land's £2.1billion Broadgate securitisation and in February 2006 on British Land's £750million BL Superstores securitisation. Highlights • Group interest costs reduced by £3 million per annum • Financing costs of Meadowhall reduced from 5.5% to 4.9%(3) • Group weighted average cost of debt reduced by approximately 10bps • Pre-tax exceptional charge of £50 million mainly due to difference between the redemption value and book/nominal value of existing debt • EPRA NAV reduced by 6 pence per share; EPRA NNNAV virtually unchanged • The new simplified structure will provide significant rating improvements for existing bondholders Commenting on the Proposed Transaction, Graham Roberts, Finance Director ofBritish Land, said: "This major refinancing of Meadowhall unlocks significantadditional value for bondholders and British Land. Bondholders will benefitfrom a simplified structure and significant rating improvements; forshareholders there is improved financing flexibility, prior to our anticipatedchange to REIT status, allowing reduced interest charges going forward. TheProposals have been approved by a Special Committee of the ABI representing 43%of the existing fixed rate bonds." Enquiries: The British Land Company PLCGraham Roberts, Finance Director Tel.: +44 20 7467 2948Peter Clarke, Executive Officer Tel.: +44 20 7467 2886 Morgan StanleyCecilia Tarrant, Executive Director Tel.: +44 20 7677 5350Christopher Rees, Executive Director Tel.: +44 20 7677 8009 The Royal Bank of ScotlandAndrew Burton, Head of Liability Management Tel.: +44 20 7085 8056Paul Crawford, Securitisation Director Tel.: +44 20 7085 5165 UBS Investment BankLeland Bunch, Executive Director Tel.: +44 20 7568 5390Duane Hebert, Executive Director Tel.: +44 20 7567 7480 Finsbury Gordon Simpson Tel.: +44 20 7251 3081 Notes: (1) At 20 November 2006, Meadowhall CMR Finance plc had £852.5 million of bonds outstanding. (2) Throughout this announcement, the nominal value and coupons of the New Bonds are stated based on market pricing as of 13 November 2006. (3) Throughout this announcement, the financial effects of the Proposed Transaction on British Land are stated on a pro forma basis as though it had completed on 30 June 2006 assuming the number of shares in issue as at that date and using the assumed nominal value and coupons of the New Bonds as described in note (2) above. The actual financial effects, including the nominal value and coupons of the New Bonds issued and the accounting charge that will be incurred by British Land, will be determined by interest rates on the Pricing Date. Background The Meadowhall financing was funded through an issue of bonds by Meadowhall CMRFinance plc (the "Existing Bonds"), in December 2001. Meadowhall is asuper-regional shopping centre located 3 miles from Sheffield city centre.Since December 2001, the value of Meadowhall has increased from £1,280 millionto £1,612 million as of 30 June, 2006, and the rental income has increased from£60 million at the time of the original securitisation to £72.9 million as ofOctober 2006. The Proposed Transaction Meadowhall Finance PLC, a wholly owned subsidiary of British Land, is proposingto issue new bonds totalling approximately £1,015 million (the "New Bonds")secured on Meadowhall. The outstanding £853 million of Existing Bonds areproposed to be redeemed. Under the Proposed Transaction, which is subject to the approval of holders ofeach class of the Existing Fixed Rate Bonds (as defined below): • British Land will be moving the Meadowhall financing to a simplified CMBS structure in line with current rating agency requirements. The proposed covenant changes will closely follow those in its Broadgate and BL Superstores securitisations, including modified provisions relating to the Issuer's ability to issue further debt • The Existing Bonds will be refinanced as follows: • £736 million of Existing Bonds with fixed rate coupons (the "Existing Fixed Rate Bonds") will be redeemed at the applicable redemption price. Subject to certain exceptions, the redemption price will be settled by delivery of new fixed rate bonds issued by Meadowhall Finance PLC (the "New Fixed Rate Bonds") to the holders of Existing Fixed Rate Bonds. The New Fixed Rate Bonds will be priced at par and issued with a compensating increase in nominal value of approximately £39 million, calculated at the yield to maturity commensurate with the relevant class of Existing Fixed Rate Bonds as described in the Consent Solicitation Document being published today, and with new lower coupons which are expected to reflect the current market for similarly rated securities. Accrued interest will be paid in cash. The New Class B Fixed Rate Bonds are expected to be rated AA/AA 3 notches higher than the Existing Class B Fixed Rate Bonds rated A/A. • The remaining £116 million of the Existing Bonds which have floating rate coupons (the "Existing Floating Rate Bonds") will be redeemed in cash on the interest payment date falling due in January 2007 in accordance with their terms. Following the Proposed Transaction, it is expected that the total nominal valueof the outstanding Meadowhall debt will be approximately £1,015 million. Theactual amount will depend on the final pricing determined by reference tointerest rates on a date closer to the date of settlement (the "Pricing Date"). A Consent Solicitation Document (containing a preliminary offering circular inrespect of the New Bonds) is being published by Meadowhall CMR Finance plctoday setting out proposals to the Existing Fixed Rate Bondholders in respect ofthe redemption of the Existing Bonds (the "Proposals") and setting out terms forthe New Bonds. The Consent Solicitation Document contains notices convening meetings of eachclass of the Existing Fixed Rate Bondholders to be held on 12 December 2006 toconsider and, if thought fit, approve Extraordinary Resolutions to effect theProposals. Subject to the Proposals being approved, and the conditionsspecified in the Consent Solicitation Document being satisfied or (if capable ofwaiver) waived, Existing Fixed Rate Bondholders who deliver valid votinginstructions as required by the Consent Solicitation Document (which, subject asprovided in the Consent Solicitation Document, are not subsequently revoked orwithdrawn) before 2.00 pm on 5 December 2006 will be entitled to receive a feepayable in cash in an amount equal to 0.20% of the current nominal principalamount of their Existing Fixed Rate Bonds (the "Early Solicitation Fee"). Theexpiration date for Existing Fixed Rate Bondholders to submit completed votinginstructions in order to vote at the meetings is 9.00 am on 8 December 2006.Assuming the Proposals are approved, the Proposed Transaction is expected toclose shortly thereafter in 2006. Effect on Existing Bondholders Holders of Existing Fixed Rate Bonds will receive New Fixed Rate Bonds with acompensating increase in nominal value of approximately £39 million, calculatedat the yield to maturity commensurate with the relevant class of Existing FixedRate Bonds as described in the Consent Solicitation Document, and with new lowercoupons which are expected to reflect the current market levels for similarlyrated securities. The Class A2 and C1 Existing Floating Rate Bonds will be redeemed at par on theinterest payment date falling due in January 2007. Class A2, M1 and C1 NewFloating Rate Bonds will be issued at current market levels. Benefits for Existing Fixed Rate Bondholders The Proposed Transaction offers a number of benefits to the Existing Fixed RateBondholders including: • the New Fixed Rate Bonds will benefit from a less complex structure than the Existing Fixed Rate Bonds • as an incentive to Existing Class A1 Fixed Rate Bondholders to vote in favour of the Proposals, provided the Proposals are passed by each Class of the Existing Fixed Rate Bonds, the Existing Class A1 Fixed Rate Bondholders will be paid a fee (the "Implementation Fee"); • as an incentive to Existing Class B Fixed Rate Bondholders to vote in favour of the Proposals, the Existing Class B Fixed Rate Bonds will be redeemed at a premium to where they were trading prior to announcement of the Proposed Transaction, approximately equivalent to the value of the Implementation Fee; • the New Class B Fixed Rate Bonds are expected to achieve ratings higher than those that currently apply to the Existing Class B Fixed Rate Bonds. • the issuance of the New Class M1 and Class C1 Floating Rate Bonds subordinate to the New Class A1 and Class B Fixed Rate Bonds and the New Class A2 Floating Rate Bonds will improve the credit metrics of the New Fixed Rate Bonds when compared with the Existing Fixed Rate Bonds; • by receiving New Fixed Rate Bonds of an increased nominal amount, calculated at current market rates in respect of the Existing Class A1 Fixed Rate Bonds and at a premium to current market rates in respect of the Existing Class B Fixed Rate Bonds, Existing Fixed Rate Bondholders will obtain security over the premium to nominal value at which the Existing Fixed Rate Bonds are currently trading; and • market liquidity for the New Fixed Rate Bonds may increase slightly as a result of the increase in the aggregate issue size, with the total value of outstanding New Fixed Rate Bonds in issue increasing by approximately 6% above the total value of the Existing Fixed Rate Bonds currently in issue. A Special Committee of the Association of British Insurers, representingapproximately 43% of the principal amount outstanding of the Existing Fixed RateBonds, has considered the proposals. The members of the Special Committee haveindicated that they find the proposals acceptable, that they intend to vote infavour of the Proposals in respect of their holdings and that they will beinviting other ABI members to consider a similar course of action. Effect on British Land Under the Proposed Transaction, British Land will be raising approximately£1,015 million of financing secured on Meadowhall in a simplified structure withimproved covenants and sufficient operational flexibility to address itsbusiness needs going forward. British Land will incur a pre-tax exceptional charge of approximately £50million,(4) mainly due to the difference between the redemption value and book/nominal value of its existing debt. However, the Proposed Transaction reducesfuture interest costs and is expected to result in a positive impact on pre-taxprofits of approximately £3 million per annum. The Proposed Transaction isexpected to reduce the weighted average cost of debt secured on Meadowhall fromthe current 5.5% to approximately 4.9% and reduce British Land's ongoingheadline cost of debt overall on a pro forma basis by approximately 10bps. The impact of the exceptional charge will be to reduce EPRA net asset value(5)("EPRA NAV") by £32 million, equivalent to 6 pence per fully diluted share as at30 June 2006. However, there will be virtually no effect on British Land's EPRANNNAV, "triple net" asset value, that is EPRA NAV less fair value adjustmentsfor debt and derivatives and the deferred taxation on revaluations and capitalallowances. The Proposed Transaction, which is subject to the approval of holders of eachclass of the Existing Fixed Rate Bonds, is expected to close in December 2006. Notes: (4) The exceptional charge includes an amount relating to the Early Solicitation Fee, which is assumed to be payable to all Existing Fixed Rate Bondholders, though the actual amount will depend on the number of such bondholders submitting their voting instructions in the required form on or prior to 5 December 2006. (5) EPRA net asset value per diluted share as at 30 June 2006 of 1,592 pence, is stated in accordance with the Best Practices Policy Recommendation, issued by The European Public Real Estate Association ("EPRA") in January 2006. The EPRA NAV per share includes the external valuation surplus on trading properties but excludes the fair value adjustments for debt and related derivatives and deferred taxation on revaluations and capital allowances, calculated on a fully diluted basis. Indicative terms of the Proposals Under the Proposals, the yield at which the Existing Fixed Rate Bonds will beredeemed will be equal to the sum of the relevant Benchmark Reference SecurityYield on the Pricing Date and the applicable fixed spread as stated in thetable, expressed on an annual 30/360 day count basis, compounded quarterly.Subject to certain exceptions, the redemption price will be settled by deliveryto the holders of New Fixed Rate Bonds priced in line with current market levelsfor similarly rated securities. Indicative terms of the Proposals to Existing Fixed Rate Bondholders based onyields on 13 November 2006 are summarised in the table below. Class Existing Existing Final Benchmark Redemption New Nominal New Issue New Coupon Nominal Coupon Maturity Reference Spread (6) Spread (6) Security A1 £580m 5.26% 2032 UKT 4 3/4's of 45 bps £603m 45 bps 4.90% 2020 B £156m 5.79% 2032 UKT 5's of 2025 58 bps £172m 58 bps 4.89% £736m 5.37%(7) £775m 48 bps 4.89% (6) Illustrative pro forma based on market pricing at the close of business on13 November 2006. Final pricing will be determined by reference to yields onthe relevant Benchmark Reference Securities on the Pricing Date. Existing FixedRate Bondholders will also receive accrued interest payable and the EarlySolicitation Fee (as applicable) in cash. (7) Average cost of debt weighted by nominal value. Important notice The contents of this press release, which have been prepared by and are the soleresponsibility of British Land, have been approved by Morgan Stanley & Co.International Limited ("Morgan Stanley") solely for the purposes of section 21(2)(b) of the Financial Services and Markets Act 2000. Morgan Stanley, togetherwith The Royal Bank of Scotland plc ("RBS") and UBS Limited ("UBS"), are actingfor Meadowhall CMR Finance plc, British Land and Meadowhall Finance PLC inconnection with the Proposed Transaction and no one else, and will not beresponsible to anyone other than Meadowhall CMR Finance plc, British Land andMeadowhall Finance PLC for providing the protections offered to clients ofMorgan Stanley, RBS and/or UBS nor for providing advice in relation to theProposed Transaction. The address of Morgan Stanley is 25 Cabot Square, CanaryWharf, London E14 4QA. This press release does not constitute an offer to sell or the solicitation ofan offer to buy securities of Meadowhall Finance PLC. Nothing in this pressrelease constitutes advice on the merits of buying or selling a particularinvestment or exercising any right conferred by the securities described herein. Any investment decision as to any purchase of securities referred to hereinmust be made solely on the basis of information contained in the final form ofthe offering circular of Meadowhall Finance PLC and no reliance may be placed onthe completeness or accuracy of the information contained in this press release. Securities are not suitable for everyone. The value of securities can go downas well as up. You should not deal in securities unless you understand theirnature and the extent of your exposure to risk. You should be satisfied thatthey are suitable for you in the light of your circumstances and financialposition. If you are in any doubt you should consult an appropriately qualifiedfinancial advisor. Notes to editors: Meadowhall is a super-regional shopping centre located 3 miles from Sheffieldcity centre in England The current property value, as of 30 June 2006, is £1,612 million, with passingrent of £72.9 million as of October 2006; however, there are a number of rentreviews currently under negotiation, expected to be settled before the closingof the transaction. The current stabilised rent is £75.2 million. Morgan Stanley & Co. International Limited is acting as Arranger and SoleBookrunner and Morgan Stanley & Co. International Limited, The Royal Bank ofScotland plc and UBS Limited are acting as Solicitation Agents and Joint LeadManagers in connection with the Proposed Transaction. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
British Land