Morgan Stanley provides €430m for CMBS refinancing

Morgan Stanley has provided a £350 mln (€430 mln) facility to enable The Mall Fund, owner of six UK shopping centres, to repay CMBS bondholders.

London-listed Capital & Regional is the fund's property and asset manager. The company announced on Thursday that the facility, split into two tranches, has a five-year term. Morgan Stanley is also providing an additional £25 mln capital expenditure facility.

Capital & Regional CEO Hugh Scott-Barrett, said: "This refinancing has been achieved at a very attractive all-in cost against the current initial yield of 6.7% produced by The Mall Fund's assets. It has allowed us to establish a strong platform for growth by creating the flexibility for The Mall Fund to continue its programme of capital investment in order to create long-term value, at a time when sentiment is improving in both the investment and tenant markets.'

Aviva Investors holds a 50% interest in the Mall Fund, with Capital & Regional owning 29%.

The CMBS will be settled from a combination of both the new £350 mln term loan and, along with an associated £10.67 mln interest rate swap liability triggered on repayment, from The Mall Fund's existing cash resources.

The new Morgan Stanley facility comprises a fixed-rate tranche of £233.3 mln with interest fixed at 1.86% plus applicable margin and a floating rate tranche based on 3-month LIBOR of £116.7 mln. The latter tranche will be hedged using an interest rate cap at a strike rate of 2.75%. The capex facility will also be at the same floating rate and interest rate hedging on this element of the facility will be determined as it is drawn down.

The initial margin on all elements of the facility is set at 1.9%, but the margin is dependent upon the loan to value ratio (LTV). The margin would increase by 25 basis points if the LTV were to exceed 60%. However, it would fall by 15 basis points if the LTV were to reduce to 45%.

The LTV covenant under the new facility is 75% and, based upon the published 31 March 2014 valuation of The Mall Fund's properties, the initial LTV would be 51% prior to the drawdown of any of the capex facility. The Mall Fund and Aviva, its fund manager, were advised by Rothschild on the refinancing.