Capital & Regional to raise £30m as part of mall debt restructure

Convenience-focussed commercial property investor Capital & Regional said on Thursday that it has agreed with its lenders to restructure and reduce the debt secured over its four mall assets, including the launch of a fully underwritten open offer to raise £30m.

The London-listed firm said the mall facility currently comprised a £265m debt facility with RBS and TIAA secured over the four assets, being the Mall Blackburn, the Mall Maidstone, the Mall Wood Green and the Mall Walthamstow.

TIAA currently had a balance outstanding of £165m, and RBS had a balance outstanding of £100m.

Under the terms of the restructuring, Capital & Regional Holdings agreed to acquire the £100m of debt outstanding with RBS for a principal amount of £81m, representing a discount of £19m, or 19%.

The proposed mall debt restructuring would be funded through a combination of TIAA acquiring £35m of the RBS debt acquired by Capital & Regional Holdings, increasing its lending secured over the four assets from the current £165m to £200m.

Additionally, £30m would be raised through an open offer at a price of 56p on the pro rata basis of 23 shares for every 48 existing shares held, and £16.9m would be funded by cash currently held on the company's balance sheet.

The capital raising was fully underwritten by Capital & Regional’s largest shareholder, Growthpoint.

Its board said the effect of the restructuring, combined with the capital raising, would be to reduce its pro forma net loan-to-value ratio as at 30 September from 61% to about 50% on the basis of its investment assets and central operations, or from 72% to 63% on a total group basis.

Under the terms of the restructuring, a waiver of all financial covenants in the mall facility would be provided for two years from the date that the TIAA real estate facility agreement became effective and further modifications made to cash trap covenants for 18 months from that date.

Assuming rental income returned to a more normalised basis, the company said it was aiming to resume, in line with UK REIT requirements, the distribution of cash dividends from the second half of 2022.

Completion of the capital raising was conditional on the approval of shareholders at a general meeting on 1 November.

Growthpoint, which is interested in 58,261,066 existing shares or 52% of the company's issued share capital, had undertaken to vote in favour of all resolutions.

“We recently announced a set of results which clearly demonstrate the relevance of our community centres strategy, the underlying strength of our portfolio and the skills and commitment of our team,” said chief executive officer Lawrence Hutchings.

“Against the backdrop of a positive reopening of the economy following the disruption caused by the pandemic and increased confidence in our segment of the retail and services market we have been focusing our resources on generating the highest returns from our core mall investment assets while working closely with our lenders towards both restructuring and reducing the group's debt.”

Hutchings said the proposed transactions, which would recapitalise the balance sheet, would allow the firm to achieve that, and represented a “significant and positive” step forward.

“They will allow us to once again focus fully on continuing our repositioning and merchandising, while looking at how we can best leverage the expertise in our platform and, in due course, the reintroduction of cash dividends.”

At 1149 BST, shares in Capital & Regional were down 2.44% at 56p.