Shaftesbury details redemption of 8.5% first mortgage debenture stock

By Wendy Van Sickle

Columbus, Ohio, Sept. 30 – Shaftesbury plc set the date and price for the previously announced redemption of its £61,048,148 of 8.5% first mortgage debenture stock due 2024, according to a filing with the London Stock Exchange.

The debenture stock will be redeemed on Oct. 7, either by an exchange for new notes or a cash payment for stockholders who cannot or do not confirm their eligibility to receive the first mortgage bonds.

Shaftesbury announced plans in August to issue newly created longer-dated first mortgage bonds in exchange for the 8.5% first mortgage debenture stock. The company priced the £285 million of bonds due Sept. 30, 2031 on Friday with a 2.487% coupon.

The stock redemption price was set at 151.011, the exchange ratio at 1.51011 and the stock redemption amount to be paid for stock not exchanged at £92,189,419.

Exchange plan

The new mortgage bonds will issued by Shaftesbury Carnaby Ltd., a wholly owned subsidiary.

Proceeds from any additional bonds will be used for general corporate purposes or to pay cash to non-eligible stockholders.

The stock was 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 company said in August.

The stock is trading at a “substantial premium to par,” the company noted.

Shaftesbury said that restructuring the stock will benefit stockholders by offering a market price for the stock much closer to par.

Other benefits to holders include the following:

• Under an exchange, the market premium to par of the current stock will effectively become secured and be subject to covenants of 1.67 times capital cover and 1.25 times income cover based on the full nominal value of the bonds rather than the existing nominal value of the stock;

• A security package for the first mortgage bonds will 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 of the stock, and Shaftesbury has not yet exercised its rights to withdraw properties from the security pool;

• 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;

• Exchange terms will result in stockholders receiving bonds at a premium to the current market value of the stock; and

• 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.

“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,” Chris Ward, finance director of Shaftesbury, said in a press release.

“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.”

Shaftesbury is a London-based real estate investment trust.

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