Tesco puts fifth securitisation on offer

Tesco has used its covenant and supermarkets to raise another £450m via its fifth CMBS issue in the past three years. The 30-year credit-linked bonds are secured on 11 stores, one of which is in development.

The bonds are underpinned by rents from Tesco and supported by Tesco’s corporate guarantee, and were rated A- by Standard & Poor’s. They carry a 5.66% coupon  and were issued at a price reflecting 275 basis points over the 4.25% 2032 gilt benchmark.

As well as the attractive margin over gilts, the bonds’ long-dated, fixed-interest nature, plus the Tesco guarantee, makes them attractive to institutions looking to match long-term liabilities.

The deal has a sale-and-lease-back format, like its predecessors. The buyer is a Tesco subsidiary special property vehicle including a third-party investor, reported to be Trinity College, Cambridge. The deal is being financed with a 30-year amortising loan at a 102.3% loan-to-value level. Goldman Sachs, HSBC, RBS and Lloyds were joint arrangers.