IERE.L Regulatory News (IERE)

1 May 2014

INVISTA EUROPEAN REAL ESTATE TRUST SICAF

(the "Company")

Invista European real estate trust Completes the REFINANCING OF ITS SENIOR LOAN

The Board of Invista European Real Estate Trust SICAF ("IERET" or the "Company") is pleased to announce that it has entered into a new credit facility (the "New Loan") with Blackstone Real Estate Debt Strategies ("BREDS"), an affiliate of the Blackstone Group LP ("Blackstone") in an amount of €220 million. As a result, it has repaid all outstanding amounts due to Bank of Scotland, the economic interest of whose loans to IERET had been sold in November 2013 to funds affiliated to Cerberus Capital Management, LP.

Terms of the Refinancing

The New Loan has a maturity of three years, with an option on the part of the Company to extend for two additional twelve month periods, subject to certain conditions. The initial margin is 770bp over three month EURIBOR, with an agreed path for a potential reduction to 470bp as set out below.

The Company is currently pursuing a programme of fourteen targeted asset disposals, of which the sale of the property at Modletice in the Czech Republic has already been completed. The New Loan has a flexible structure that will enable Invista to pursue its non-core disposal plan by providing €85 million of freely prepayable proceeds which can be repaid via asset sales or contributions of additional equity.

Once the total amount of the New Loan has been reduced to €135 million and so long as the LTV is below 70%, the ("Step-Down Event"), the margin will be reduced to 470bp over three month EURIBOR. The LTV covenant, which is set initially at 85%, falls to 80% following the Step-Down Event.

For the first thirty months of the New Loan, any early repayments beyond the first €85 million (or any repayment from the proceeds of properties that are not designated as part of the disposal programme) will trigger an early redemption premium equivalent to the full interest rate on the amount repaid for the balance of that period.

Under the terms of the New Loan, a cash sweep will be applied to the Company's income prior to the Step-Down Event. As a consequence, no distributions to ordinary or preference shareholders can be made for the duration of the cash sweep, with the preference share dividend therefore being accrued. The Company regards making the repayments necessary to eliminate the cash sweep as an objective of the highest priority.

Outlook

The New Loan has enabled the Company to repay its previous indebtedness in full without recourse to shareholders. The terms are closely aligned to the disposal programme on which the Company is making encouraging progress, with properties currently under offer for a total amount of over €50 million.

The interest cost of the New Loan will initially account for the majority of the Company's expected income and the Company has low levels of working capital as a result of the costs of the refinancing. The lower margin triggered by a reduction in the amount of the New Loan outstanding to €135 million would, however, leave the Company with more substantial income attributable to shareholders and open out the range of options for the Company's future strategy.

The Company will work relentlessly, through the disposal programme and other initiatives, both to enhance its working capital position and to reduce the outstanding amount of the New Loan to the level that eliminates the cash sweep and triggers the lower interest margin. At the same time, the actions being pursued with the support of Blackstone, consolidating the portfolio around core logistics while enhancing the value of the Company's German retail properties through selective capital expenditure, should strengthen the longer term position of the Company.

Over the past eighteen months, against a background of challenging market conditions and changing circumstances, the Company has explored a large number of avenues for refinancing, with both the existing and potential new lenders.

From the options open to the Company at this time, the Board concluded that the New Loan represented the best solution for shareholders. The New Loan provides a significant extension of time for the asset management and, in some cases, disposal of properties. The Board and the Investment Manager are committed to using that time to identify and implement the next steps for the Company in the best interests of shareholders. 

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