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Proposal to amend the terms of the Debenture

4 Aug 2016 07:00

RNS Number : 1811G
Shaftesbury PLC
04 August 2016
 

Shaftesbury PLC

 

Proposal to amend the terms of 8.5% First Mortgage Debenture Stock due 2024

Proposal

Shaftesbury announces that it has held discussions with certain holders of its £61,048,148 8.5% First Mortgage Debenture Stock due 2024 (the "Stock") about a proposal to amend the terms and conditions of the Stock (the "Proposal").

The Proposal, if approved and implemented, would permit Shaftesbury to redeem the Stock in exchange for an issue of newly created longer-dated first mortgage bonds ("First Mortgage Bonds"). A cash alternative would be made available to all Stockholders who cannot or do not confirm their eligibility to receive the First Mortgage Bonds.

Shaftesbury expects to convene a meeting of Stockholders to approve the amendment of the terms and conditions of the Stock to include a new condition providing Shaftesbury with the ability to redeem the Stock in full at the Stock Redemption Price (as defined below) prior to its final maturity date by either (i) exchanging the Stock for First Mortgage Bonds (in the case of Stockholders who elect to do so and confirm their eligibility to invest in the First Mortgage Bonds ("Eligible Stockholders")) or (ii) for cash (in the case of other Stockholders). The amendments would be effected by an Extraordinary Resolution of Stockholders (approval of at least 75% of the Stock by nominal value of those voting).

The Proposal has been considered by a Special Committee (the "Special Committee") of The Investment Association at the request of Shaftesbury. The members of the Special Committee, who hold in aggregate approximately 82.6% of the Stock have examined the Proposal. They have informed Shaftesbury that they find the Proposal acceptable; that, subject to client and other approvals, they intend to vote in favour of the Proposal in respect of their holdings of Stock; and they invite other members of The Investment Association to consider a similar course of action. The Special Committee has advised Shaftesbury that this recommendation relates only to the Proposal with respect to the Stock and not to any future offers or proposals which Shaftesbury may make.

First Mortgage Bonds

Subject to pricing and market conditions at the time, and the approval of the Proposal at the meeting of Stockholders, Shaftesbury will issue a Benchmark Sterling issue of First Mortgage Bonds with a maturity of 2028 or 2031. A portion of the First Mortgage Bonds would comprise "Exchange Bonds" to be applied in redeeming the Stock held by Eligible Stockholders, with any remainder representing "Additional Bonds". The proceeds from any Additional Bonds would be used for general corporate purposes and/or to pay cash to non-Eligible Stockholders. Any issue of First Mortgage Bonds is expected to take place before the end of 2016.

The First Mortgage Bonds would be issued by Shaftesbury Carnaby Ltd (to be re-registered as a PLC)1, a wholly-owned subsidiary of Shaftesbury PLC, and guaranteed by Shaftesbury PLC.

Rationale

The Stock was originally issued in 1994 with a high coupon, which is now out of line with current market levels, and documentation which no longer reflects current market practice. The Stock currently trades at a substantial premium to par.

Shaftesbury believes that a restructuring of the Stock, as envisaged by the Proposal, has benefits for both Shaftesbury and Stockholders. Important advantages for Stockholders who exchange their Stock for First Mortgage Bonds include:

i. a market price for the First Mortgage Bonds much closer to par;

ii. under an exchange into par-priced new First Mortgage Bonds, the market premium to par of the current Stock (which premium is unsecured) would effectively become secured and be subject to covenants of 1.67x capital cover and 1.25x income cover based on the full nominal value of the First Mortgage Bonds rather than the existing nominal value of the Stock;

iii. a security package for the First Mortgage Bonds which would include a larger and more diverse asset pool. Currently, the value of the assets charged under the Stock is substantially in excess of the minimum required under the covenants in the terms and conditions of the Stock and Shaftesbury has not yet exercised its rights to withdraw properties from the security pool;

iv. an updated trust deed, including enhanced information provisions for investors, improved frequency and testing of covenants, an improvement to some key terms and covenants and improved security top-up provisions relating to income cover;

v. terms of the exchange that would result in Stockholders receiving First Mortgage Bonds at a premium to the current market value of the Stock; and

vi. subject to pricing and market conditions, the aggregate principal amount of First Mortgage Bonds is expected to be significantly greater than that of the Stock.

Any issue of First Mortgage Bonds is dependent on the passing of an Extraordinary Resolution of Stockholders approving the necessary amendments to the terms and conditions of the Stock. Any issue of First Mortgage Bonds by Shaftesbury pursuant to the Proposal is also subject to pricing and market conditions at the time and Shaftesbury reserves the right to determine whether or not to issue the First Mortgage Bonds.

[1] Or an alternative wholly-owned subsidiary of Shaftesbury PLC

 

Commenting on the Proposal, Chris Ward, Finance Director of Shaftesbury said:

'Long-term debt financing provides an efficient and effective method of funding for Shaftesbury, compatible with our long-established business model and portfolio of good quality assets, with strong income streams, in London's West End. The Proposal, if implemented, would offer Eligible Stockholders the opportunity to benefit from an improved security and covenant package, modern contractual provisions and a current market coupon.'

 

Enquiries:

Shaftesbury PLC

0207 333 8118

Brian Bickell, Chief Executive

Chris Ward, Finance Director

Capital Access Group

0203 763 3400

Simon Courtenay

 

IDCM Limited ("IDCM")

0203 542 3921

Stuart Bell, Executive Director

4 August 2016

 

 

 

 

 

About Shaftesbury

 

Shaftesbury PLC is a Real Estate Investment Trust, which owns a unique real estate portfolio extending to 14 acres in the heart of London's West End - a highly popular, sought-after and prosperous destination for visitors and businesses. Our holdings are concentrated in Carnaby, Covent Garden, Chinatown, Soho and Charlotte Street.

Our objective is to deliver long-term growth in rental income, capital values and shareholder returns.

We focus on retail, restaurants and leisure in the liveliest parts of the West End. Our portfolio now comprises 589 shops, restaurants, cafés and pubs, extending to 1 million sq. ft., and accounting for 70% of our current income. In our locations these uses have a long record of occupier demand exceeding their availability. The portfolio also includes 406,000 sq. ft. of offices and 539 apartments for rent, which provide 17% and 13%, respectively, of our current income.

In addition, we have a 50% interest in the Longmartin joint venture with The Mercers' Company, which has a long leasehold interest in St Martin's Courtyard in Covent Garden. Extending to 1.9 acres, it includes 21 shops, ten restaurants and cafés, 102,000 sq. ft. of offices and 75 apartments.

Our proven management strategy is to create and foster distinctive, attractive and prosperous locations. Its implementation is supported by an experienced management team with an innovative approach to long-term, sustainable income and value creation, and a focus on shareholder returns. We have a strong balance sheet with modest leverage.

 

Forward-looking statements

This document may contain certain 'forward-looking' statements. By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances. Actual outcomes and results may differ materially from any outcomes or results expressed or implied by such forward-looking statements.

Any forward-looking statements made by, or on behalf of, Shaftesbury PLC speak only as of the date they are made and no representation or warranty is given in relation to them, including as to their completeness or accuracy or the basis on which they were prepared. Shaftesbury PLC does not undertake to update forward-looking statements to reflect any changes in its expectations with regard thereto or any changes in events, conditions or circumstances on which any such statement is based.

Information contained in this document relating to Shaftesbury PLC or its share price, or the yield on its shares, should not be relied upon as an indicator of future performance.

 

IDCM is acting as Solicitation Agent in connection with the Proposal and will not be responsible to anyone other than Shaftesbury for providing advice in relation to the Proposal. The Solicitation Agent takes no responsibility for the contents of this announcement and none of the Solicitation Agent or any of its directors, employees, officers, consultants, agents or affiliates makes any representation or recommendation whatsoever regarding the Proposal.

 

THIS ANNOUNCEMENT INCLUDES INSIDE INFORMATION.

THIS ANNOUNCEMENT DOES NOT CONSTITUTE AN OFFER TO BUY OR THE SOLICITATION OF AN OFFER TO SELL THE STOCK OR FIRST MORTGAGE BONDS DESCRIBED HEREIN.

NOT FOR PUBLICATION OR DISTRIBUTION IN THE UNITED STATES, CANADA, JAPAN OR AUSTRALIA. 

THIS ANNOUNCEMENT MAY NOT BE DISTRIBUTED, TAKEN OR TRANSMITTED IN OR INTO THE UNITED STATES, ITS TERRITORIES OR POSSESSIONS OR TO U.S. PERSONS, OR IN OR INTO ANY OTHER JURISDICTION IN WHICH TO DO SO WOULD BE UNLAWFUL AND ANY FORWARDING, DISTRIBUTION OR REPRODUCTION OF THIS ANNOUNCEMENT IN WHOLE OR IN PART IS UNAUTHORISED. FAILURE TO COMPLY WITH THIS NOTICE MAY RESULT IN A VIOLATION OF THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR THE APPLICABLE LAWS OF OTHER JURISDICTIONS.

THIS ANNOUNCEMENT IS ONLY DIRECTED AT (I) PERSONS WHO ARE OUTSIDE THE UNITED KINGDOM OR (II) THOSE PERSONS WHO ARE EXISTING MEMBERS OR CREDITORS OF SHAFTESBURY OR OTHER PERSONS WITHIN ARTICLE 43 OF THE FINANCIAL SERVICES AND MARKETS ACT 2000 (FINANCIAL PROMOTION) ORDER 2005 (THE "ORDER") OR (III) INVESTMENT PROFESSIONALS FALLING WITHIN ARTICLE 19(5) OF THE FINANCIAL SERVICES AND MARKETS ACT 2000 (FINANCIAL PROMOTION) ORDER 2005 (THE "ORDER") OR (IV) HIGH NET WORTH COMPANIES, AND OTHER PERSONS TO WHOM IT MAY LAWFULLY BE COMMUNICATED, FALLING WITHIN ARTICLE 49(2)(A) TO (D) OF THE ORDER (ALL SUCH PERSONS IN (I), (II), (III) AND (IV) ABOVE TOGETHER BEING REFERRED TO AS "RELEVANT PERSONS") AND MUST NOT BE ACTED ON OR RELIED UPON BY PERSONS OTHER THAN RELEVANT PERSONS. FOR ANY PERSON VIEWING THIS ANNOUNCEMENT WHO IS NOT A RELEVANT PERSON, THIS ANNOUNCEMENT IS PUBLISHED FOR INFORMATION PURPOSES ONLY.

Appendix - further detail

Pricing of the First Mortgage Bonds

The First Mortgage Bonds due 2028 or 2031 would be issued at par (the "New Issue Price") on the basis of a yield and coupon (the "New Issue Yield") to be determined on the pricing date as:

· the mid‐market yield on such date of the 6.00% UK Treasury Gilt due December 2028 or 4.75% UK Treasury Gilt due December 2030; plus

· a market-based spread which would be determined on the pricing date on the basis of a bookbuild process (the "New Issue Spread").

The pricing date (the "Pricing Date") would be at least 5 business days prior to the settlement date for the issue of the First Mortgage Bonds. If the First Mortgage Bonds are not issued by 31 December 2016, the existing Stock will not be exchanged for First Mortgage Bonds (nor redeemed under the cash alternative).

Subject to pricing, Shaftesbury's intention would be to make available new First Mortgage Bonds to all Eligible Stockholders who wish to subscribe for an amount in excess of their entitlement under the Proposal.

Terms of the exchange

The redemption price of the Stock (the "Stock Redemption Price") used to calculate the redemption amount would be determined on the Pricing Date. The Stock Redemption Price would be based on the "Stock Redemption Yield", which would be calculated on the Pricing Date as:

· the mid‐market yield of the 2.75% UK Treasury Gilt due September 2024; plus

· a spread which is 0.675% per annum less than the New Issue Spread (the "Stock Redemption Spread").

The amount of First Mortgage Bonds that each Stockholder receives would be determined based on the exchange ratio calculated by dividing the Stock Redemption Price for the Stock by the New Issue Price for the First Mortgage Bonds (the "Exchange Ratio").

Stockholders would also receive interest accrued on the Stock in cash from the last interest payment date on the Stock to the settlement date.

The effect of the spread used to calculate the Stock Redemption Price being 0.675% per annum lower than the New Issue Spread on the First Mortgage Bonds would be to provide Stockholders with a present value of First Mortgage Bonds equivalent to a premium over the present value of the Stock.

The table below is for indicative purposes only and shows the indicative impact of the exchange, based on Gilt yields as at 2nd August 2016, assuming a maturity for the First Mortgage Bonds of 30 September 2028, a settlement date 5 days after the pricing date and an illustrative New Issue Spread of A%, rounded to 3 decimal places.

New First Mortgage Bonds

Benchmark Gilt

UK Treasury 6% 2028

Benchmark Gilt Yield

1.017%

Illustrative New Issue Spread

A%

New Issue Yield

(1.017+A)%

Coupon

(1.017+A)%

New Issue Price

100.000%

 

Existing Stock

Benchmark Gilt

UK Treasury 2.75% 2024

Benchmark Gilt Yield

0.714%

Stock Redemption Spread

(A-0.675)%

Stock Redemption Yield

(0.714+(A-0.675))%

Stock Redemption Price, rounded to 3 decimal places

£B

Exchange Ratio

B/100.000

 

Note: Indicative amounts based on (i) mid‐market benchmark Gilt yield of 0.714% for the Stock and 1.017% for the First Mortgage Bonds as at 2nd August 2016 (ii) an illustrative New Issue Spread of A% pa and (iii) the Stock Redemption Price calculated using Bloomberg. Eligible Stockholders who exchange their existing Stock into First Mortgage Bonds would under this illustration receive £B nominal of First Mortgage Bonds for each £1 nominal of Stock held, together with interest accrued but not yet paid under the Stock.

In order to receive First Mortgage Bonds in exchange for their Stock, among other things Stockholders would have to certify in writing to Shaftesbury that they are eligible purchasers under all applicable securities laws and would receive a First Mortgage Bond of at least the minimum denomination, expected to be £100,000. Stockholders who do not provide such certification to Shaftesbury would receive the cash alternative.

Stockholders who do not exchange their existing Stock into First Mortgage Bonds, including non-Eligible Stockholders, would under this illustration receive £B for each £1 nominal of Stock held, together with interest accrued but not yet paid under the Stock.

Expected timetable

Date

Event

August 2016

· Notice of meeting sent

August/September 2016

· Meeting of Stockholders held

· Result of meeting announced

September/October 2016

· Marketing of First Mortgage Bonds

· Bookbuilding of First Mortgage Bonds

· Pricing Date

Pricing Date + at least 5 business days

· Settlement date

 

Note: The expected timetable is indicative only and subject to alteration by Shaftesbury.

 

This information is provided by RNS
The company news service from the London Stock Exchange
 
END
 
 
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