

Terra Firma, Guy Hands’ private equity firm, has closed a £4 billion (€4.6 billion) refinancing of its UK housing platform, the Annington Group, through a combination of fresh debt and equity.
In addition to issuing £3 billion of corporate bonds and sourcing £400 million in bank loans, the firm has raised £550 million from existing investors through its Terra Firma Special Opportunities Fund 2, to contribute fresh equity to the group.


The recapitalisation allows Terra Firma to refinance securitised debt held against the housing portfolio, which had a 2021 maturity. Last week, Annington Group investors passed an extraordinary resolution to allow the firm to redeem the Annington Finance No1 and No4 deals, which had outstanding balances of £168.9 million and £2.5 billion respectively.
The firm has replaced the securitised debt with an investment-grade financing with staggered maturities out to 2047, in addition to the new equity. Barclays and JP Morgan were mandated as joint lead managers.
Terra Firma CEO Andrew Géczy told Real Estate Capital the refinancing was a “landmark transaction” for the firm and the wider UK real estate sector.
The bond issue, he said, demonstrates the depth and liquidity of the capital markets, with each tranche at least twice oversubscribed. In addition to tackling the maturity profile of its debt and reducing interest rate risk, Géczy said that the deal has granted Terra Firma growth capital to invest in the UK’s burgeoning private rented residential sector.
“We had in place a whole business securitisation structure which was innovative at the time, but we started to consider how to position Annington,” Géczy said. “We started to talk to banks last autumn and at the time they thought we couldn’t take the leap from a securitisation structure to investment-grade credit.”
The £400 million, five-year bank loans were sourced to add flexibility to the debt structure. In addition to Barclays and JP Morgan, debt was provided by Santander, Goldman Sachs RBS Natwest Markets and BNP Paribas.
Investment in the PRS sector will be “incremental” and carried out on an opportunity-led basis, Géczy said, with a focus on single-family product rather than multi-family developments, in line with the existing Annington portfolio.
The platform was created in 1996 to acquire 57,400 homes from the UK’s Ministry of Defence, the majority of which were subsequently leased back to the ministry. Annington refurbishes and then sells or rents properties which are surplus to the ministry’s requirements. In total, the platform owns around 40,000 homes.
Hands was behind the 1996 purchase of Annington while an investment banker at Nomura International. His private equity firm acquired it from Nomura in 2012 for £3.2 billion. The deal comprised £1 billion of equity from a Terra Firma specialist fund, plus debt financing and assumed existing debt totalling £2.2 billion.
“When we acquired Annington in 2012, we always knew there was a single issue that would hold the business back – its legacy capital structure,” Géczy said in a statement.
Terra Firma previously owned a German housing platform – Deutsche Annington – which it bought in 2001. That was floated on the Frankfurt Stock Exchange in 2013 and is now branded as Vonovia.
In December 2012, Deutsche Annington was subject to a major refinancing, when outstanding debt securitised in the GRAND CMBS – Europe’s largest CMBS deal, issued in 2006 – was reduced from €4.3 billion to €3.8 billion and the profile of the notes was extended to 2018. In July 2013, Deutsche Annington repaid the remaining GRAND notes, substituting the debt with unsecured corporate bonds.