GSW joins convertible bond issue trend

Berlin residential specialist GSW is the latest company to issue a convertible bond, raising €182.9m to finance further acquisitions.

The unsubordinated, unsecured seven-year bond carries a 2.0% coupon and the initial conversion premium is 22.5% above GSW’s €29.555 reference price. It is convertible into 5.1m ordinary shares.

GSW is the second German listed residential company to issue a convertible bond this year; in June TAG Immobilien issued a similar seven-year bond, raising €85.3m.

Four UK property companies have issued convertible bonds this year, after a gap of four years. TAG’s carried a higher coupon, at 5.5%, while the conversion premium was 20% above the reference share price.

“Active financial management is becoming increasingly important for keeping borrowing costs to a minimum and ensuring a high level of flexibility for financing new investments,” said GSW chief financial officer Andreas Segal. “Alternative financing instruments such as convertible bonds help.”

The company has a 53,000 unit portfolio, valued at €2.9bn and bank debt of €1.83bn, carrying a weighted average interest rate of 4% and with a weighted average maturity of 11 years.

The issue also helps diversify GSW’s funding sources and investor base; existing GSW shareholders were not given pre-emptive rights to subscribe to the bonds.

Deutsche Bank and Société Générale were the deal’s joint bookrunners and lead managers. Meanwhile, TAG Immobilien has completed the acquisition of the TLG Wohnen residential portfolio from the German state. Its €471m bid was partly financed by the issue of 30m new shares.

Barclays and Credit Suisse are the deal’s joint coordinators and bookrunners and have also provided a bridge financing commitment. Lone Star is reported to be in pole position to buy the TLG Immobilien commercial portfolio, for around €1.1bn with stapled debt.