Merlin Properties, the Spanish SOCIMI, has completed an €850 million unsecured bond issuance with a maturity of seven years and an all-in cost of 2.225 percent.
The proceeds will refinance an €850 million bridge-to-bond loan which was provided by ten lenders and refinanced debt which funded Merlin’s acquisition of property company Testa Inmuebles last year. The bridge loan was due to mature in December 2017.
Last December, Merlin agreed a €1.7 billion refinancing of the original debt it sourced to finance the Testa purchase. The two-tranche unsecured loan was provided by Société Générale, BNP Paribas, Cédit Agricole CIB, Credit Suisse, Deutsche Bank, ING, Intesa SanPaolo, JP Morgan, Mediobanca and Goldman Sachs.
The first tranche consisted of an unsecured €850 million loan with a bullet repayment in June 2021, priced at 160 basis points over Euribor. The second tranche consisted of the €850 million bridge-to-bond loan, which was priced at 100 basis points over Euribor. The proceeds repaid the outstanding Testa mortgage debt, excluding debt related to the residential portfolio and a €350 million bridge loan obtained for the acquisition of Testa.
Shareholders at Merlin’s AGM earlier this month approved the issuance of up to €1.5 billion of bonds.
The bonds to refinance the bridge loan were four times oversubscribed, Merlin said.
Subscription and payment for the notes is expected on 25 April 2016. The bonds are subject to English law and it is expected that they will be admitted to listing on the Luxembourg Stock Exchange.
Following the issue, Merlin’s average debt maturity has been extended to seven years, with fixed-rate increased to 87 percent and bank financing reduced to 65 percent of total debt. The firm’s average cost of debt is now 2.33 percent.
“This successful inaugural bond issuance has proven the strong credit profile of Merlin and an opportune timing, as evidenced by the overwhelming appetite in the market for the notes, with an over-subscription ratio of four times. Furthermore, the company has accomplished well ahead of calendar and at a better cost than expected the objective of optimising its capital structure and diversifying its financial sources,” said Ismael Clemente, chief executive officer of Merlin.
Merlin, which launched in June 2014, is the largest real estate company listed on the Spanish Stock Exchange. It has a market cap of around €3.2 billion. The SOCIMI mainly invests in offices, shopping centres and logistics in core and core-plus segments in the Iberian region.