Noteholders back GRAND rescue plan

Big majority of investors approve Deutsche Annington plan to extend and refinance €4.3bn CMBS

Deutsche Annington has persuaded investors to back its proposals for restructuring the €4.3bn GRAND CMBS.

The German multi-family housing borrower and its adviser, Blackstone, secured approval from 90% of noteholders, when it only needed 75% by value, plus a majority by number.

“The numbers speak for themselves; it was overwhelmingly well received,” said one adviser on the transaction. “Not many people can remember a deal receiving such an impres-sive sign-up before it’s been officially launched.”

Bondholders were tempted by a 20bps consent fee if they entered lock-up agreements by last week. A 10bps sweetener is still on offer if noteholders jump on board before mid December.

Deutsche Annington’s proposals include an average margin increase of 116.7bps paid on the notes – lower than some had hoped for. One junior noteholder said the borrower’s “divide and conquer” strategy had succeeded.

Deutsche Annington also proposes to inject €504m of fresh equity, cutting the outstanding securitised debt to €3.8bn and the loan-to-value ratio below 60%, and further fixed amortisation targets, in return for a five-year extension of the notes to 2018.

Focus has turned to the court process that will rubber-stamp the scheme of arrangement that will implement the refinancing, with a view to its completion before the end of the year.

“Nobody is counting their chickens before the framework for the deal is [legally] approved,” said the adviser. “But there is no reason to think it shouldn’t be and if it goes through the court by Christmas, Europe’s biggest restructuring should be completed.”

The borrower must now secure €1bn before July 2014. It has promised to repay €700m in the second year of the notes’ extension, €650m in years three and four, and the rest in year five.

Deutsche Annington is confident this can be done, based on the low leverage required – plus the fact that the 162,100 homes underlying the deal are stable assets with good income of the kind banks have been lending against for the past year.

Restructuring in separate chunks will also make it more manageable. The adviser pointed out that the borrower has an incentive to refinance quickly if it wants to launch an initial public offering and float the business.

One potential option it could explore is an agency-style CMBS, like Vitus’s deal run by Deutsche Bank, but it is thought more likely to gain finance from a syndicate of German banks.

Timetable of principal events

23 November: First court hearing to convene the scheme creditors’ meeting
14 December: Scheme creditors’ meeting to vote on the scheme 19 December: Court hearing to sanction the scheme
21 December: Anticipated scheme closing date

 

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