Redefine looks to slash debt with cut-price equity issue

Company seeks £122.5m to help pay down maturing Delta CMBS loan

Redefine International is issuing discounted equity as part of its battle to cut its high gearing and stabilise its capital structure.

The quoted property company, which is managed and 71.7% owned by South Africa’s Redefine Properties International, announced a firm placing and open offer to raise £122.5m net of costs at 26p, a 22.4% discount to the 12 September share price.

Last year Redefine merged with UK property company Wichford in a deal that valued Redefine’s shares then at 46.4p. Both had assets that were highly geared after heavy falls in value.

The loans against several portfolios were securitised, including the bulk of Wichford’s assets, mainly government-let regional offices. Wichford’s £114.6m Delta facility securitised in Windermere XI and £199.7m Gamma in Windermere VIII mature next month.

Redefine is extending Delta’s loan maturity to the April 2015 note maturity date, keeping the same loan margin of 0.75%. It will repay £33.5m, secured on seven mainly long-let assets with part of the equity raised.

It aims to sell the remaining 16 secondary properties, which have shorter leases, to cut the £81.1m still to be repaid. A Chalkhill Partners note predicted “significant losses” on the Gamma loan. “The directors are unwilling to recommend further equity injections given Gamma’s loan-to-value ratio and the assets’ secondary nature.”

It added: “A recent £82m Delta valuation, against £114.6m of debt [representing a 140% LTV ratio] gives an insight into the portfolio’s problems. The loan’s poor performance has led to a fall in bond prices across the deal’s capital structure.”

Redefine also invests on the Continent and in Australia. In August, it gave 50% of its stake in the four-asset German VBG portfolio, which carries €117.3m of debt, to a pension fund.

In return, the new JV agreed with the loan servicer to buy the assets for £85m and use €80m net proceeds to repay debt, after contributing €28m of equity and with a €57m, five-year loan from a German bank.