UK property company Shaftesbury has turned to the bond market to raise £285 million of capital.
The firm, which owns a property portfolio in London’s West End, issued guaranteed first mortgage bonds with a September 2031 maturity date. The bonds carry a coupon of 2.487 percent.
Shaftesbury said that the bonds are secured on properties held by subsidiary Shaftesbury Carnaby and also have an unsecured guarantee from the parent company.
Following the bond issue, Shaftesbury fully redeemed £61 million of first mortgage debenture stock, which was due in 2024. The holders exchanged their stock for either bonds or cash. The net proceeds of the bond issue, after deducting redemption costs and expenses, was £189.4 million.
The firm has used the net proceeds to reduce drawings in its revolving credit facilities, which remain available to be re-drawn. The current marginal cost of the credit facilities is around 1.5 percent per year and the initial reduction in the firm’s blended cost of drawn debt is 25 basis points.
Shaftesbury also intends to use proceeds of the bonds to cancel interest rate swaps with a notional principal of up to £55 million.
In addition, the company said that the issue increases its resources for further investment in the portfolio, whilst lengthening its weighted average debt maturity to 10.8 years.
Invesco Asset Management acquired £27.4 million of the bonds on behalf of discretionary managed clients. IDCM and Lloyds Bank acted as managers in the bond issue.
“We are pleased to have completed this refinancing of our existing debenture stock. Long-term finance is a natural fit with our long-term business model and portfolio of good quality assets in London’s West End, which produce a resilient, and growing, income stream,” said Chris Ward, finance director at Shaftesbury.
“At a historically low coupon, the issue has reduced our cost of debt. As well as raising significant resources for further investment in our portfolio, it has diversified our sources of funding and extended our weighted average debt maturity,” he added.