Clifford Chance and Simmons & Simmons have closed the second whole-business securitization of a shopping centre in Europe. The Meadowhall Shopping Centre near Sheffield, UK, which has around 132, 000 square metres of space including 230 shops and kiosks and 27 restaurants to let, has raised £875 million ($1.3 billion) against rent receipts. The deal is larger than Europe's first shopping centre deal, the £610 million securitization of the Trafford Centre in Manchester last year.
Under the deal, which closed on December 5, the British Land special purpose vehicle (SPV) Meadowhall CMR Finance issued five tranches of bonds with maturities of between eight and 30 years. Around £600 million of the bonds issued are rated AAA/AAA by Standard & Poor's/Fitch.
Clifford Chance advised lead managers The Royal Bank of Scotland, Schroder Salomon Smith Barney and Morgan Stanley. Clifford Chance securitization partner Andrew Forryan led a group that also included real estate partner Robert McGregor, tax partner Michael Wistow and insolvency specialist Adrian Cohen.
|
John Davies, Simmons & Simmons |
UK real estate owner British Land instructed Simmons & Simmons, which advised the company on the securitization of receipts from Sainsbury's supermarkets in the Broadgate and Werretown Shopping Centre deals closed last year. Simmons financial markets partners James Bresslaw and John Davies led their firm's team, which also included tax partner Edward Troup.
Proposed reforms
Davies said that while the Meadowhall securitization was in many ways a copy of the debt financing structured request by British Land for the Broadgate and Werretown transactions, the deal was complicated by new government proposals for reforms in UK insolvency law that could have affected such deals. Simmons and Clifford Chance were able to structure the deal so that even if it failed to qualify for grandfathering - exemption from retroactive effects of new legislation - it would not be affected by the proposed reforms.
"You have to think through with the debt rating agencies what would happen [if the law is passed]. While there had been a clear statement in parliament it wasn't a legal statement. So there might have been a possibility that some deals which we thought would be grandfathered would not be. The government is going to have to be quite careful when they draft this grandfather wording because they won't want to create a stable door through which the horse can bolt," said Davies.
At Clifford Chance Forryan agreed that the possibility of the proposed law's retroactive effects was of major concern when structuring the transaction, though both he and Davies declined to clarify what structures were necessary. "A lot of the noise centred around what was going on and trying to read market sentiment on whether whole-business securitizations would fall fowl of the enterprise White Paper. If there was anything that was going to hold up the deal that was it," he said.
Peter Clarke, head of asset management at British Land, said that the company saw securitization as a useful way to use existing asset flows to leverage the group at attractive rates. He would not comment on whether the company had further deals planned.