Gagfah taps capital markets to help shift €5.3bn debt pile


German housing company will add CMBS to new debt and loan extensions, reports Lauren Parr

Germany’s biggest listed owner of multi- family housing, Gagfah, is refinancing €5.3bn of debt partly through the recuperating capital markets. It is working on a €700m CMBS to be placed directly with investors, which is being brought to market by Goldman Sachs and Uni-Credit.

The CMBS equates to about a third of the €2bn of its debt that is due this August. For the remainder, it has secured five term sheets from three German banks, an insurance company and an international lender. The original €2bn loan was securitised as German Residential Funding (GRF) in 2006. The Fortress-backed company has also closed a €1.06bn loan to refinance the debt secured on its Woba portfolio of Dresden properties, which had been due to mature in May.

Klinck: “It helps us to get better margins and reduce execution risk if we have more lenders in the market”

“When we started to refinance we had €5bn in place maturing in 2013 and 2014, a big tranche of which expired this year,” says Gagfah chief financial officer Gerald Klinck. One of its aims, he says, is to broaden the company’s lender base, as well as staggering the maturity profile of its debt.

Part one involved refinancing the Woba portfolio. Bank of America Merrill Lynch surprised rivals and other observers by step- ping in to provide a new five-year loan in February for the full €1.06bn, at a 3.85% interest rate – 48 basis points lower than the coupon on the previous loan.

The new origination was led by BoAML’s Guillaume Gruschet in London, and at least part will be securitised. The structure is in place and BoAML is looking for investors.

“At 60% leverage the bank was prepared to provide debt on a stand-alone basis, which was beneficial for the company,” says Klinck. In comparison, German banks typically supply €100m-200m for the final take, which would have meant Gagfah would need more banks to put the debt together.

Competition brings better margins

However, competition has returned to Gagfah’s domestic market, with banks and insurers willing to provide debt and “some banks coming back with bigger tickets in Germany”. Klinck says this is also positive, as “it helps us to get better margins in place and reduce execution risk if we have more lenders in the market.”

Apr 2013, p20, i1A smaller piece of the debt that matures this year – a €221m loan to Gagfah subsidiary GBH – has also been rolled over by one year until 2014, pushing up the maturities coming up next year to €1.6bn.

Asset sales, including 576 apartments in Heidenheim from the GBH portfolio, will also help towards the refinancing.

Apr 2013, p20, i2Part two of the 2013 refinancing is a six-tranche plan including the new €700m CMBS to repay the €2.06bn German Residential Funding CMBS loan, jointly issued by Deutsche Bank and Goldman Sachs in 2006 and due on 15 August.

The five new loans Gagfah reported securing last month range from five to 10 years. As one of the five lenders, AIG is thought to be underwriting a €350m senior loan, while Goldman Sachs is either co-ordinating or originating a €250m senior loan. A €467m senior loan will be provided by Uni-Creidt subsidiary HypoVereinsbank, Deutsche Pfandbriefbank and Helaba, with each pfandbriefbank taking an equal €158.6m. However, this line-up could still change before the refinancing is completed.

Klinck sees “appetite coming back in the capital markets”. He says: “We have banks in place that are sounding out the market. Data rooms are open and we’re well prepared on the legal side of the CMBS.”

He says a multi-strand strategy is justified because it is “important for us not to put all our eggs in one basket”, and is “happy with the term sheets” Gagfah has secured.

The listed group’s shares have more than doubled in the past 12 months and it made a €48m net profit last year, reversing an €18m 2011 loss. Gagfah’s management, including new chief executive Thomas Zinnöcker (former head of Berlin housing group GSW), will be thinking about refinancing the 2014 maturities in June or July. Its focus so far has been on its most pressing financial affairs, which are all but straightened out.