Liberty scores a first with UK student housing-backed US private placement

Liberty Living secures £100m despite shorter track record than others that have tapped US market

Student accommodation firm Liberty Living has raised £100m of secured debt from the US private placement market as part of a £300m refinancing.

Liberty’s track record is not as long as other property companies that have accessed this unrated market on an unsecured basis in the past 18 months, such as Grosvenor and British Land.

So its secured issue is seen as a sign that a wider pool of asset- backed companies may be able to raise finance in the liquid US private placement market.

It is also the first time US private placement investors have funded UK student accommodation – a relatively new property asset class.

Stephen Sheridan, finance director of Liberty Living, the brand name of the Brandeaux Student Accommodation Fund, said: “This is a trail-blazing move, partly for bringing UK student accommodation to the private placement market and because of the security package, which isn’t necessarily the way the USPP market works. “It shows this market can be opened up to other businesses.”

The $155m raised was swapped into £100m sterling, in two equal senior note tranches: a 10-year tranche costing 2.6% over US Treasury notes, which were 2% for both maturities when the pricing was fixed; and a 12-year tranche at 2.7% above Treasuries. After exchange rate and period swaps, the blended rate was 5.16%.

The 10 investors were all from the US and the largest took 36%. The private placement investors rank equal to banks HSBC and RBS, which lent the rest of the£300m funding and were the placement’s arrangers.

The £200m from the banks is split equally into a five-year term loan at an all-in rate of 4.27% and a five-year revolving credit facility, which Liberty will use to make acquisitions.

Some 34 assets, representing 90% of the portfolio, are secured against the funding; the other 10% “are small-value buildings which don’t meet our criteria in the long run or have complex expansion issues”, Sheridan said.

The bank loans replace a £200m Lloyds facility that was due to expire this month. Liberty and the banks went to seven US cities on the roadshow for the private placement, which was more than five times oversubscribed, demonstrating the depth of the market.

Law firm Pinsent Masons advised the banks and Olswang advised Liberty. At least one other property company plans to access the US  private placement market on a secured basis next month.