Once the country’s second-biggest property company, Colonial ran into severe trouble when Spain’s property market crashed in 2008. A restructuring last year finally righted the balance sheet with a new €1.04bn syndicated loan and a €1.26bn share issue.
The new bond issue, which Standard & Poor’s has given a preliminary rating of BBB, will repay the syndicated loan which carries a spread of 400 basis points over Euribor and matures in December 2018.
The loan accounts for about 40% of the group’s debt; at end-March Colonial’s net debt was €2.6bn, an LTV of 43%.
Standard & Poors have given Colonial a preliminary ‘BBB-/A-3’ credit rating, the first investment grade status awarded to a Spanish property company. “The stable outlook reflects our view that expected moderate rental income growth should gradually improve the company’s credit metrics over the next two years. It also incorporates our expectation that the company’s credit metrics will improve as its interest costs will decrease once it refinances its syndicated loan,” said S&P.
The rating agency considers Colonial has a “strong” business risk profile, given the high quality of its €6bn Spanish and French office portfolio. With Spain’s economy expected to grow at 2% over the next two years and a more modest recovery in France, office demand should increase, driving take-up and rents.
Morgan Stanley as lead manager and JP Morgan as joint lead manager, together with BBVA, Banco Sabadell, CaixaBank, Credit Agricole CIB, ING and J.P. Morgan have been mandated to start bookbuilding.