Merlin Properties issues 1.875% bond in Metrovacesa refinancing

Merlin Properties has issued an €800 million, unsecured 10-year eurobond to refinance a bridge loan made to its latest and largest acquisition, Metrovacesa.

The new bond pays a coupon of 1.875 percent, which is a margin of 160 basis points over the swap, and will be used to repay a €500 million ‘bridge to bond’ bank facility signed by Metrovacesa in April. The money will also be used for general corporate purposes.

Merlin took over Metrovacesa this month to become one of the largest diversified commercial REITS in Europe and Spain’s largest Socimi. The deal, agreed with majority shareholder Santander which, with a group of other banks had restructured Metrovacesa after the crash, created a real estate company with gross assets of €9.3 billion.

This week’s bond is Merlin’s second issuance and follows an €850 million, debut debt offering in April which refinanced approximately half of the debt it inherited through its 2015 acquisition of Testa.

Late last year, Merlin arranged a loan for €1,700 million with ten overseas banks, which was structured into two tranches of €850 million each, one of which was due to expire in December 2017 and which was repaid through the April bond issue.

Testa, a residential company, is now merging its multifamily portfolio with Metrovacesa’s, and the enlarged operation has 4,700 units under management with a GAV of €980 million.

Merlin has an investment grade rating from Standard & Poor’s of BBB and Baa2 from Moody’s. It said the new bond extends average debt maturity out to 6.8 years from 5.7 years and fixes the rate on 91.8 percent of its loans. The average cost is now 2.28 percent.

Ismael Clemente, CEO, commented: “Through this transaction debt maturities for the next five years have been reduced to a minimum and our exposure to interest rate rises represents less than 10% of our debt.

“Merlin increases its annual free cash flow to shareholders and is hedged against future upwards movements in interest rates.”