The UK based holiday provider, Center Parcs, has revealed a first of its kind financing package that enables it to repay its existing debt while also raising funds for expansion and growth.
The innovative structure blends a £740 million whole business securitisation (WBS) with the issuance of a £280 million high-yield bond out of the same issuing structure. It is the first time this model has been used in Europe.
Many lawyers believe that the Center Parcs refinancing signals the start of a trend of transactions that use a range of options to achieve successful financing solutions.
This type of solution is something we expect to see more of in the future, said Marcus Mackenzie of Freshfields. It should be a very attractive way for businesses which are real-estate asset rich to refinance themselves where they are currently financed through a commercial mortgage backed security (CMBS) that is coming to the end of its life.
The WBS and high yield bonds are backed by the four existing Center Parcs sites across the UK.
Simone Bono, high yield partner at Freshfields said the combination of investment grade bonds with a high yield tranche enabled Center Parcs to maximise its investor base.
The blending of a WBS with a high yield bond presented lawyers with the challenge of coming up with a security and intercreditor package that would satisfy both sets of creditors.
Mackenzie, who led the Freshfields team, said the high yield creditors wanted their own separate enforcement process akin to what they would have had if they had been lending in at a more normal structurally subordinated level.
The financing was structured with a separate piece of security at the top of the structure which high yield creditors can enforce independently of the main transaction security. Enforcement of this is effectively in the hands of the WBS creditors.
We managed to keep the two groups happy and come up with a workable structure in terms of who gets what and when, added Mackenzie.
The £1.2 billion refinancing was devised for Center Parcs with the combined proceeds refinancing the groups existing CMBS and subordinated debt.
Advising Royal Bank of Scotland as global co-ordinator and arranger: Freshfields
Advising the borrower: Allen & Overy.
Joint lead managers on the whole business securitisation and high yield bond offerings: Barclays Capital, HSBC and Lloyds.