Insurers refinance CMBS facility with 2 new loans

UK investment manager Picton Property Income has agreed two new debt facilities totalling £209 mln (EUR 261 mln) with Aviva Commercial Finance and Canada Life. The new facilities will be used to refinance Picton’s existing CMBS facility and bank loan totalling £188.5 mln, which were due to mature in 2013.

Up to £114 mln of debt has been secured with Canada Life for a term of up to 15 years, while up to £95 mln has been agreed with Aviva for a term of 20 years. The funding has been secured at a blended margin of around 2.1% which, based on benchmark gilts, reflects a fixed cost of some 4.4%. The loan-to-value covenant on both facilities is 65%. In order to facilitate an early repayment of its existing facilities, Picton incurred an undisclosed sum in swap break costs in July 2012 along with additional arrangement and restructuring costs. However, the terms of the new loans are lower than the previous arrangements under the CMBS facility.

Picton is an internally managed, listed investment company established in 2005 to invest both directly and indirectly in commercial property across the UK. ID3 Capital Partners and Bishopsfield Capital Partners were joint financial advisers to Picton on the transaction and provided debt arranging and structuring services.

The transaction could serve as a model to refinance other CMBS facilities due to mature in the next couple of years, according to Arjan van Bussel, partner at Bishopsfield Capital Partners. ‘A lot of refinancing is due from 2013,’ he pointed out. ‘Borrowers that arrange financing well in advance of the loan maturity are in a much stronger position to secure a better deal.’

The Picton deal involved splitting up the portfolio securing the CMBS facility into two separate loans, Van Bussel explained. ‘The portfolio was performing well and for insurers like Aviva and Canada Life, Picton was the ideal client with such low LTVs.’

The two new loan facilities provide Picton with long-term financing with a staggered maturity profile of 10, 15 and 20 years. Under the deal with Canada Life, Picton may repay £34 mln after year 10, leaving £80 mln for year 15. The £95 mln loan with Aviva has a scheduled annual amortisation profile of repaying approximately one third of the debt over the 20-year life of the loan.

Picton Property Income is an income focused, internally managed investment company listed on the London and Channel Islands Stock Exchanges. It was established in 2005 to invest both directly and indirectly in commercial property across the UK.

Founded in 2009, Bishopsfield Capital Partners is a boutique advisory firm active in structured and corporate finance as well as investment management services for financial institutions, corporations, institutional investors and high net-worth individuals. Van Bussel was previously responsible for European commercial real estate transactions in the structured finance team of Royal Bank of Scotland and prior to that worked in structured real estate capital at ABN Amro.