Merlin To Complete Its €850M Bond Issue Imminently

4 April 2016 – Cinco Días

The Socimi Merlin Properties, which is listed on the Ibex 35, will issue BBB-rated bonds amounting to €850 million within the next few days, for the first time in its short history. This operation forms part of the debt restructuring process supported by Testa, the real estate company acquired from Sacyr.

Within the next few days, the market will be filled with bonds from the Socimi Merlin Properties, which will use this financing instrument for the first time since it debuted on the stock exchange in June 2014. The entity chaired by Ismael Clemente (pictured above) hopes to launch €850 million of this type of security with a BBB rating, imminently, through an issue aimed at institutional investors, according to financial sources.

This operation forms part of the company’s debt restructuring plan following its acquisition, last year, of the real estate company Testa from Sacyr for around €1,800 million. As a result of that deal, the Socimi took on debt amounting to €1,700 million, which it needs to refinance soon (…).

Merlin’s first step involved refinancing a €1,700 million loan with ten overseas banking institutions to pay off the debt. The debt was structured into two tranches, amounting to €850 million each, which are due to mature in December 2017 and June 2021, respectively.

The upcoming €850 million bond issue relates to the first tranche, which matures in December 2017 and which Merlin plans to repay by approaching the capital markets. The bond issue will probably be registered in Luxembourg this week, which according to Ismael Clemente, is the most active market alongside Ireland and Frankfurt for this type of operation.

The roadshow will begin next week

Next week, the heads of Merlin will hold a roadshow for international institutional investors to explain the operation. They expect pension funds, debt funds and insurance companies to be most interested in the purchase. Financial sources indicate that the underwriting banks will be JP Morgan, Credit Suisse, ING, Goldman Sachs and BNP Paribas, amongst others. (…).

The Socimi will decide the term of the new bonds on the day that it places them, but in theory, the term will be between five and eight years, depending on demand from investors, and the interest rate will range between 2% and 3%. Merlin’s current loan with the 10 banks accrues interest at Euribor plus 100 basis points, which will increase to Euribor plus 200 basis points from December. (…).

The banks with which Merlin currently holds its €1,700 million loan are: Société Générale, Credit Suisse, BNP Paribas, Crédit Agricole, ING, Intesa Sanpaolo (an Italian bank with a limited history in Spain), Mediobanca, Deutsche Bank, JP Morgan and Goldman Sachs. (…).

Original story: Cinco Días (by Alfonso Simón Ruiz)

Translation: Carmel Drake

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