Intu debt platform engineers £1.1bn refinancing for malls

Special-purpose vehicle refinances four malls via bond and loan package

Intu has refinanced £1.15bn of borrowings – a third of its debt – with a bond and loan package, the inaugural issue for its new debt platform.

Nottingham's Victoria Centre is one of four malls Intu refinanced
Nottingham’s Victoria Centre is one of four malls Intu refinanced

Special purpose-vehicle Intu (SGS) Finance was set up last month as the group’s central financing platform.

“It allows us to tap the bond markets alongside bank debt,” said Intu finance director Matthew Roberts. “We had not issued rated paper before. We can now diversify the length and tenor of debt and it allows us to lock in lower interest rates.”

Standard & Poors gave the bonds an A rating. The £800m of bond and £350m of bank debt refinances Intu shopping centres Lakeside, Braehead, Watford and the Victoria Centre in Nottingham, which were put into the SPV.

The issue was heavily oversubscribed, leading Intu to add a second tranche. It is divided into £450m of 10-year, 3.875% bonds and £350m 15-year, 4.625% bonds, priced at spreads of 210bps and 205bps respectively over the benchmark gilts.

“We hoped it would do well, but I was taken aback at the quantum of demand,” Roberts said. “It’s a tribute to the quality of the assets.”

UBS, HSBC and Bank of America Merrill Lynch arranged the issue and are underwriting the £350m, five-year bank loan, which is being syndicated.

Intu is also injecting £200m from its cash and debt facilities to refinance the balance of the existing debt on the assets and pay for deal costs, including an estimated £60m-70m incurred in breaking the swaps on the debt.

Intu is paying 520bps on its group borrowings, but the new debt’s blended cost is 440bps.

“The refinanced assets were previously paying the same as the new debt, but having done a big deal at 440bps, over time others should help lower our average debt cost,” Richards said.

The refinancing is at a 50% loan-to-value ratio. But Intu’s SGS has the flexibility to put in or substitute assets, issue new debt and fund developments. “There is a tiered covenant regime, so the better we do, the more flexibility we have,” said Roberts.