Alternative investment house Terra Firma has arranged a £4 bn (€4.56 bn) refinancing for its UK residential platform Annington Group.
Terra Firma has raised £550 mln (€626 mln) from existing investors through Terra Firma Special Opportunities Fund 2 to contribute new equity to the refinancing, in addition to £3 bn (€3.4 bn) of corporate bonds in sterling and euros and £400 mln (€456 mln) in bank loans.
The transaction, worth around £4 bn (€4.56 bn), will transform Annington’s capital structure from relying on a securitisation structure maturing in 2021, to having an investment grade financing with staggered maturities as far out as 2047, along with an additional £550 mln of new equity.
'When we acquired Annington in 2012, we always knew there was a single issue that would hold the business back – its legacy capital structure,' commented Andrew Géczy, Terra Firma's CEO. 'Today’s announcement is a result of Terra Firma moving quickly to take advantage of favourable market conditions. This deal puts Annington on a strong financial footing and positions it for growth.'
The new capital structure lowers Annington's cost of borrowing, as well as de-risking its capital structure substantially from future interest rate increases, the company said.
'Today's transaction is transformational and puts Annington in a strong position with both cheaper and longer term debt that sets us up well for the future. We very much appreciate the strong vote of confidence shown in Annington by our shareholders, banks and the capital markets by this transaction,' said James Hopkins, Annington's CEO.
Ministry of Defence
Annington Homes, the largest private owner of residential property in England and Wales, was created in 1996 to acquire more than 57,400 residential properties from the Ministry of Defence (MoD), the majority of which were immediately leased back to the MoD on a 200-year lease. The business refurbishes and sells or rents on the open market those homes released by the MoD as surplus to its needs.
It now owns 40,000 homes, the majority of which are still leased to the MoD.
'Just as we did with Deutsche Annington, Tank & Rast and AWAS, we have identified a market opportunity and moved quickly and creatively to execute a deal that will create considerable value for both Annington and our investors. This landmark deal builds on the firm's significant achievements over the course of the last year,' concluded Géczy.
Barclays and JPMorgan were mandated as joint lead managers on the issuance.
