Novel debt restriction helps property issuer

Author: Danielle Myles | Published: 26 Feb 2011

A small Argentinian property company has issued high yield despite its size and developers’ typically unsteady cash flows.

The offering circular for Raghsa’s $100 million of senior notes omitted a fundamental covenant. “The big difference is there wasn’t a ratio for debt incurrence,” said Juan Mendez from bookrunners’ US counsel Simpson Thacher & Bartlett.

The family-owned company has two business lines: building-to-sell residential space, and building-to-lease commercial space. The time lag between building and selling affects any developers’ revenue, but this is amplified when the developer operates on such a small scale.

“That played a big role in how we structured the covenants...