04LL.L Regulatory News (04LL)

21 Jul 2006 09:17

British Land Co PLC21 July 2006 THE BRITISH LAND COMPANY PLC 21 July 2006 BRITISH LAND ANNOUNCES £1 BILLION DEBENTURE RESTRUCTURING The British Land Company PLC (the "Group" or "British Land") today announces itsplans for a restructuring of its existing Group debentures to create a marketleading, multi-tranche £1 billion debenture (1) with a common security pool andcovenants. The proposed transaction (the "Proposed Transaction") will deliverbenefits to both British Land and its debentureholders. For debentureholders this restructuring will create the largest individual UKdebenture security pool and is expected to improve the liquidity of thedebentures given the overall enlarged size, improved covenants and enhancedtransparency. In addition holders of BL Universal PLC ("BLU") debentures willbenefit from an upgrade of the obligor to British Land. Shareholders willbenefit from re-couponing to give a lower average interest cost on the newdebentures and as such British Land will have increased dividend cover anddistribution flexibility. In addition British Land will benefit from thecreation of a simplified, uniform secured debt structure for the non-securitisedpart of the Group. Highlights • The Existing 2028 Debentures and Existing 2019/24 Debentures will be redeemed by the issue of New 2028 Debentures and the Existing 2035 Debentures will be redeemed by the issue of New 2035 Debentures, both with current market coupons (2) • Debentureholders will benefit from one common and enlarged security pool initially valued at approximately £1.8 billion • The New Debentures will benefit from a new information and a new change of control covenant • The current obligor under the Existing BLU Debentures will be upgraded to British Land and benefit from the same common security pool and same covenant package • British Land will make a pre-tax exceptional charge of £256 million (3) mainly due to the difference between the redemption value and book/nominal value of the existing debentures • EPRA adjusted NAV will be reduced by 34 pence per share; there will be virtually no effect on NNNAV • The Group's annual interest costs will be reduced by approximately £11 million • The Group's weighted average cost of debt will be reduced from 5.71% to 5.39% Commenting on the Proposed Transaction, Graham Roberts, Finance Director of TheBritish Land Company PLC, said: "Following on from the successful BL Superstoresand Broadgate restructurings, these proposals again reflect British Land'scommitment to finding optimal long-term structures to benefit both lenders andshareholders. These proposals will give the debentures the benefits of a commonsecurity pool and improved covenants while allowing shareholders to benefit froma reduced annual interest cost. We recommend our debentureholders to vote infavour in line with the endorsement given by the Special Committee of the ABI". Enquiries: The British Land Company PLC Graham Roberts, Finance Director Tel.: +44 20 7467 2948Peter Clarke, Executive Officer Tel.: +44 20 7467 2886 The Royal Bank of Scotland Robert St. John, Managing Director Tel.: +44 20 7085 3205Andrew Burton, Head of Liability Management Tel.: +44 20 7085 8056 UBS Investment Bank Andrew Dennis, Executive Director Tel.: +44 20 7568 2902Duane Hebert, Executive Director Tel.: +44 20 7567 7480 Finsbury Faeth Birch Tel.: +44 20 7521 3801 1 Throughout this announcement, calculations are based on current pricing andassume all investors choose to redeem, rather than retain the Existing 2028Debentures and Existing 2035 Debentures. 2 Holders of the Existing 2028 Debentures and the Existing 2035 Debentures willalso be given, to a limited extent, the option to retain their existingdebenture holdings at the current 9.375% and 8.875% respective coupons, whilstthe terms of such existing debentures will be amended to benefit from the newcommon security pool and the new covenants. 3 Throughout this announcement, the financial effects of the ProposedTransaction on British Land are stated on a pro forma basis as though it werecompleted on 31 March 2006. Background British Land continually seeks to optimise its debt portfolio for the benefit ofboth its shareholders and its lenders. As part of this policy the Group hasdecided to restructure its debenture issues. British Land and BLU have, betweenthem, six outstanding debentures with an aggregate nominal value of £783m andcoupons ranging from 6.75% to 11.375%. The British Land Debentures (the "Existing BL Debentures") • £200m 9.375% First Mortgage Debenture Stock due March 2028 (the "Existing 2028 Debentures") • £250m 8.875% First Mortgage Debenture Bonds due September 2035 (the "Existing 2035 Debentures") • £12.6m 10.5% First Mortgage Debenture Stock due September 2019/24 (the "Existing First 2019/24 Debentures") • £20.4m 11.375% First Mortgage Debenture Stock due September 2019/24 (the "Existing Second 2019/24 Debentures", and together with the Existing First 2019/24 Debentures the "Existing BL 2019/24 Debentures") The BLU Debentures (the "Existing BLU Debentures") • £100m 6.75% First Mortgage Debenture Bonds due March 2011 (the " Existing 2011 BLU Debentures") • £200m 6.75% First Mortgage Debenture Bonds due March 2020 (the " Existing 2020 BLU Debentures") The Proposed Transaction Under the Proposed Transaction, British Land will create a market-leadingdebenture structure, with all debentures issued by British Land, secured on anincreased common security pool initially valued at approximately £1.8 billion,which will benefit from a new change of control clause and a new detailedinformation covenant. British Land is offering holders of the Existing 2028 Debentures, Existing 2035Debentures and Existing 2019/24 Debentures new current coupon debenturestotalling approximately £728 million by way of redemption of their Existing BLDebentures. At the same time, British Land proposes to the holders of theExisting BLU Debentures to substitute The British Land Company PLC for BLU asthe obligor under the Existing BLU Debentures through a consent solicitation. The new tranches following the restructuring (the "New Debentures") will be asfollows: • £100 million 6.75% 2011 debentures • £200 million 6.75% 2020 debentures • Approximately £349 million 5.440% 2028 debentures (the "New 2028 Debentures") • Approximately £379 million 5.348% 2035 debentures (the "New 2035 Debentures") Full details of this transaction are contained in the Consent SolicitationDocument (containing a Preliminary Prospectus in respect of the 2011 Debentures,2020 Debentures, New 2028 Debentures and New 2035 Debentures) published byBritish Land and BLU today, setting out proposals to the debentureholders (the "Proposals") and setting out terms for the New Debentures. Approval will be sought by way of Extraordinary Resolutions to be considered andif thought fit approved in meetings of holders of each series of the Existing BLDebentures and Existing BLU Debentures through a consent solicitation. The Proposals The 2028 Debentures and 2035 Debentures British Land offers each eligible holder of the Existing 2028 Debentures andExisting 2035 Debentures by way of redemption of their current debentures twonew current coupon (expected to be approximately 5.440% and 5.348% respectivelybut to be determined at the time of the pricing) debentures with the samenominal amounts and the same maturities as previously held. In addition, British Land proposes to pay holders of the Existing 2028Debentures and Existing 2035 Debentures a cash payment to compensate for thevalue of the mark-to-market premium of those current debentures above theirnominal amount. The cash amount will be financed by a tap issuance of additionalNew 2028 Debentures and New 2035 Debentures to be purchased by The Royal Bank ofScotland and UBS Limited. British Land will also give holders of the Existing 2028 Debentures and theExisting 2035 Debentures the option to retain their existing debenture holdingswith their existing respective 9.375% and 8.875% coupons. The terms of theircurrent debentures will be amended so that they benefit from the new commonsecurity pool and the new covenants, but their existing debentures will not beredeemed, reissued or otherwise reconstituted and there will be no change totheir coupon (and hence no cash payment in respect of the mark-to-marketpremium) or nominal value of the debenture. Under the Proposals, a minimum of£2m and a maximum of £30m of the Existing 2028 Debentures and a minimum of £2mand maximum of £50m of the Existing 2035 Debentures can opt for the alternative,although this condition might be waived. Debentureholders taking this optionwill, however, receive a lower level of incentive fees. The 2019/24 Debentures British Land offers each eligible holder of the Existing 2019/24 Debentures theopportunity to redeem their existing holdings and receive in return New 2028Debentures. This will be structured as a redemption of the existing debenturesat market value, with the redemption price being settled by delivery, toeligible holders, of the New 2028 Debentures in a principal amount equal to themarket value price, so that holders will be compensated for the premium value ofthe Existing 2019/24 Debentures by the delivery of additional New 2028Debentures. The BLU Debentures The nominal amounts, coupons, and maturity dates of the Existing BLU Debentureswill remain unchanged. However, under the Proposed Transaction, British Landwould assume all of the obligations of BLU under the Existing BLU Debentures(and BLU will be released from its obligations). The New 2011 Debentures and New2020 Debentures will benefit from the common security pool and improved covenantpackage. Following the Proposed Transaction, it is expected that the total nominal valueof outstanding debentures will be approximately £1,028 million. Indicative terms of the Proposals Under the Proposals, the yield at which the Existing 2028 Debentures, Existing2035 Debentures and Existing 2019/24 Debentures will be redeemed will be equalto the sum of the relevant Mid-Market Benchmark Security Rate on the PricingDate and the applicable fixed spread as stated in the table below. Subject to certain exceptions, the redemption price will be settled, by deliveryto the holders of Existing BL Debentures, of the New 2028 Debentures and New2035 Debentures and a cash payment to compensate for the premium value of theExisting 2028 Debentures and Existing 2035 Debentures above the nominal amount.The cash amount will be financed by additional issuance of New 2028 Debenturesand New 2035 Debentures. Indicative terms of the Proposals to Existing BLDebentureholders are summarised in the table below, assuming alldebentureholders choose to re-coupon: Existing Securities New Securities Cash New Securities Government Security Size Spread Price Issue Size Issue Coupon Maturity (%) (£m) Benchmark (£m) over (%) Price (%) (£m) Spread (%) Benchmark UKT 6% 9.375% due 200.0 G + 105 149.62 100.00 200.0 G +105 5.440 Mar 28 49.62 99.2 Dec-28 Mar 2028 UKT 8.875% due 250.0 G + 110 151.72 100.00 250.0 G +110 5.348 Sep 35 51.72 129.3 4.25% Sep 2035 Mar-36 UKT 10.500% 12.6 G + 100 145.36 100.00 18.3 G +105 5.440 Mar 28 0.00 0.00 4.75% due Sep Mar-20 2019/24 UKT 11.375% 20.4 G + 100 153.42 100.00 31.3 4.75% due Sep Mar-20 2019/24 Incentive Fees Holders consenting to redeem their Existing BL Debentures and receive NewDebentures will be paid incentive fees as set out in the table below if theysubmit voting instructions before the relevant Deadlines, subject to theExtraordinary Resolutions being approved. Holders of the Existing 2028Debentures and Existing 2035 Debentures choosing to retain their existingholdings at the existing coupon will only be entitled to an Early Submission Feeand will not be entitled to an Amendment Fee (see below): Existing BL Debentures Early Submission Fee BL Amendment Fee Approx. bps Expressed as % of Approx. bps Expressed as % of running yield nominal amount running yield nominal amount 2028 Debentures 1.0 0.17% 4.0 0.68% 2035 Debentures 1.0 0.20% 4.0 0.82% First 2019/24 Debentures 1.0 0.12% 4.0 0.48% Second 2019/24 Debentures 1.0 0.12% 4.0 0.49% Holders of the Existing BLU Debentures will be paid the following incentive feeif they submit voting instructions before the relevant Deadlines, subject to theExtraordinary Resolutions held at two separate meetings and at the joint meetingof holders of the Existing BLU Debentures being approved: • The holders of the two Existing BLU Debentures will vote at a joint meeting on the main amendments. • The holders of the two Existing BLU Debentures will also vote at two separate meetings of each series thereof to provide solely for the modification of the early redemption provision such that it is to be calculated with reference to their respective European Investment Bank benchmark securities rather than their respective UK gilt-edged securities. Existing BLU Debentures Early Submission Fee BLU Amendment Fee Approx. bps Expressed as % of Approx. bps Expressed as % of running yield nominal amount running yield nominal amount 2011 Debentures 1.0 0.04% 1.5 0.06% 2020 Debentures 1.0 0.10% 1.5 0.15% Expected timetable Date Event 21 July 2006 (Fri.) Announcement / launch of transaction Notice of meetings sent to Debentureholders 11 August 2006 (Fri.) Early Submission Deadline and Revocation Deadline (12 noon UK) 17 August 2006 (Thu.) Expiration Date (3 p.m. UK) 21 August 2006 (Mon.) Meetings 22 August 2006 (Tue.) Confirmation Date and Pricing Date 29 August 2006 (Tue.) Settlement Date The Consent Solicitation Document The Consent Solicitation Document contains notices convening meetings of theholders of each class of the Existing BL Debentures and Existing BLU Debenturesto be held on or around 21 August 2006 to consider and, if thought fit, approveExtraordinary Resolutions to effect the Proposals. Subject to the Proposalsbeing approved, and the conditions specified in the Consent SolicitationDocument being satisfied or (if capable of being waived) waived, holders of theExisting BL Debentures and Existing BLU Debentures who deliver valid votinginstructions as required by the Consent Solicitation Document (which, subject asprovided in the Consent Solicitation Document, are not subsequently revoked orwithdrawn) before 12 noon on 11 August 2006 (the "Early Submission Deadline")will be entitled to receive a fee payable in cash (the "Early Submission Fee").The Expiration Date for the holders of the Existing BL Debentures and ExistingBLU Debentures to submit completed voting instructions in order to vote at themeetings and receive the Amendment Fee is 17 August 2006. The ProposedTransaction is expected to close on 29 August 2006. Effects on holders of Existing BL Debentures Holders of the Existing BL Debentures will benefit from an enlarged, morediverse security pool initially valued at approximately £1.8 billion, expectedto provide an improvement in liquidity through additional transparency andincreased tranche sizes in most cases. The re-couponing of the Existing BLDebentures will mark-to-market the premium value above par and gives investorscurrent coupon debentures; the increase in the nominal outstanding valuerequires British Land to provide initially an additional £165m of collateral assecurity to cover investors' current mark-to-market premium. Holders will enjoyan improved covenant package including a new information covenant and a newchange of control clause. An Amendment Fee will be paid to all voting holders ofthe Existing BL Debentures assuming a successful conclusion. In addition,holders of the Existing 2028 Debentures and the Existing 2035 Debentures havethe option to retain their existing holdings with their existing respective8.875% and 9.375% coupons, with the terms of their current debentures amended sothat they benefit from the new common security pool and the new covenants,albeit whilst only being eligible to receive the Early Submission Fee, subjectto the Extraordinary Resolutions being approved. Effects on holders of Existing BLU Debentures The holders of the Existing BLU Debentures will benefit from the upgrade ofobligor to British Land, being a more substantial entity, whilst maintainingidentical nominal amounts, coupons and maturity dates. In addition, they will beable to enjoy the benefits of an enlarged security pool initially valued atapproximately £1.8 billion, providing additional diversity and expectedimprovements in liquidity due to the transparency of a single British Land assetpool and the same improved covenant package applicable to the Existing BLDebentures. An Amendment Fee will be paid to all voting holders of the ExistingBLU Debentures assuming a successful conclusion. The Special Committee of the ABI A Special Committee of the Association of British Insurers, consisting of fivemembers, representing approximately 48% of the principal amount outstanding ofthe Existing BL Debentures and 55% of the principal amount outstanding of theExisting BLU Debentures, has considered the Proposals. The members of theSpecial Committee have indicated that they find the Proposals acceptable, thatthey intend to vote in favour of the Proposals in respect of their holdings andthat they will be inviting other ABI members to consider a similar course ofaction. Impact on The British Land Company PLC The financial impact on the Group of the Proposed Transaction will depend on thenominal amount of Existing BL Debentures held by debentureholders who decide toreceive the New 2028 Debentures and New 2035 Debentures and market interestrates at the date the proposed transaction completes. The financial impactsshown below assume all debentureholders chose to re-coupon their Existing 2028Debentures and Existing 2035 Debentures. As a result of the Proposed Transaction, the Group could incur a pre-taxexceptional charge of £256 million, mainly due to the difference between theredemption value and book/nominal value of the Existing BL Debentures. However,the Proposed Transaction is expected to result in a recurring annual positiveimpact on pre-tax profits of £11 million (£8 million after tax) and to reducethe weighted average cost of all debt secured on the portfolio from the current8.28% to approximately 5.79%. British Land's ongoing headline cost of debt willdecrease overall on a pro forma basis from 5.71% to 5.39%. The impact of the exceptional charge will be to reduce EPRA adjusted net assetvalue ("NAV") by £179 million, equivalent to 34 pence per fully diluted share.However, there will be virtually no effect on the Group's NNNAV, 'triple net'asset value, that is, broadly, adjusted net asset value less the post-tax markto market of debt and derivatives and less contingent capital gains tax. The common security pool will lower the debt management and administration costsas well as creating a uniform secured debt structure outside the securitisedfinancing of the Group. Important Notice The contents of this press release, which have been prepared by and are the soleresponsibility of British Land, have been approved by UBS Limited, a subsidiaryof UBS AG ("UBS") solely for the purposes of section 21(2)(b) of the FinancialServices and Markets Act 2000. UBS, together with The Royal Bank of Scotlandplc ("RBS"), are acting for British Land and BLU in connection with the ProposedTransaction and no one else, and will not be responsible to anyone other thanBritish Land and BLU for providing the protections offered to clients of UBS and/or RBS nor for providing advice in relation to the Proposed Transaction. Theaddress of UBS is 1 Finsbury Avenue, London, EC2M 2PP. This press release does not constitute an offer to sell or the solicitation ofan offer to buy securities of British Land or BLU. Nothing in this press releaseconstitutes advice on the merits of buying or selling a particular investment orexercising any right conferred by the securities described herein. Any investment decision as to any purchase of securities referred to herein mustbe made solely on the basis of information contained in the final form of theProspectus of The British Land Company PLC and no reliance may be placed on thecompleteness or accuracy of the information contained in this press release. Securities are not suitable for everyone. The value of securities can go down aswell as up. You should not deal in securities unless you understand theirnature and the extent of your exposure to risk. You should be satisfied thatthey are suitable for you in the light of your circumstances and financialposition. If you are in any doubt you should consult an appropriately qualifiedfinancial advisor. Notes to editors: The British Land Company PLC is one of the UK's biggest property companies with£18 billion of gross property assets owned and managed. It is based in Londonand listed on the London Stock Exchange, investing in prime, modern properties. The Group's portfolio is valued at £14.4 billion: the majority is directly ownedand managed; the balance is held in joint ventures, partnerships and funds, ofwhich the Group's share is valued at £2.6 billion. Of the total Group portfolio,approximately £1.8 billion will be secured against the New Debentures and anyretained Existing 2028 Debentures and Existing 2035 Debentures, assuming theProposals are approved. Additional Group properties are held withinsecuritisations, including the Broadgate, Meadowhall and BL Superstoresportfolios. The £200 million 9.375% 2028 First Mortgage Debenture Stock were launched inApril 1993; the £250 million 8.875% 2035 First Mortgage Debenture Bonds inSeptember 1995; the £100 million 6.75% 2011 and £200 million 6.75% 2020 FirstMortgage Debenture Bonds in March 1998; the £12.6 million 10.5% 2019/24 FirstMortgage Debenture Stock in March 1986; and the £20.4 million 11.375% 2019/24First Mortgage Debenture Stock in August 1991. UBS Limited is acting as Lead Manager in connection with the ProposedTransaction, and together with the Royal Bank of Scotland plc, both parties areacting as Joint Solicitation Agents and Joint Bookrunners in connection with theProposed Transaction. This information is provided by RNS The company news service from the London Stock Exchange