LAWFUEL – The Law News Network – Lovells advised HSBC Bank plc as lead manager and sole book runner on a hybrid commercial mortgage backed securitisation (CMBS) for Scottish Widows Investment Partnership (a subsidiary of Scottish Widows plc) which closed on 16 February 2006.
UK Balanced Property Finance Limited (the issuer) issued £170 million floating rate secured notes due 2017, made up of £120 million primary notes and £50 million standby notes. The primary notes were rated Aaa by Moody’s. Lovells also acted for HSBC Bank plc in its capacity as working capital facility provider, account bank, hedging provider and cash manager and for HSBC Trustee (C.I.) Limited in its capacity as trustee.
The transaction adopted a hybrid approach by building on the structural features of other CMBS transactions while accommodating the business risk introduced by allowing the borrower to alter the underlying portfolio composition subject to defined criteria.* This flexibility is combined with an ability for UK Balanced Property Trust Limited (the borrower), a Guernsey investment company listed on the London Stock Exchange, to raise further capital markets debt in the future by procuring the sale of £50 million of standby notes issued at the closing date and to meet working capital facility requirements using a £5 million working capital facility.
The proceeds of the bond issue were on-lent by the issuer to the borrower and used by the borrower to refinance its existing bank borrowings of £115.4 million, providing the borrower with over £1.2 million of saved interest costs per annum over the life of the transaction. The borrower has a diversified portfolio of 93 commercial properties located in the UK.
This is the third time Lovells has advised HSBC on a CMBS transaction, having previously advised in March 2005 on a £230 million hybrid commercial mortgage backed securitisation for F&C (a subsidiary of Friends Provident plc), which formed part of a £1 billion property investment fund launched by F&C Commercial Property Trust and in November 2005 on commercial mortgage backed securitisations for LCP Proudreed.
The Lovells capital markets team on the note issue comprised Tauhid Ijaz, Julian Craughan, Rachel Pleming and Natasha Williams. Also working on the deal were Katherine Watts (real estate), Geoffrey Yeowart (insolvency) and Lyndsey Bainton and Mervyn Flatt (tax). Separately, Andrew Carey and Bing Guam advised HSBC Trustee (C.I.) Limited as trustee. Dickson Minto W.S. acted for Scottish Widows Investment Partnership and its related companies.
Speaking for the Lovells team, capital markets partner Tauhid Ijaz said:
“We are pleased to have advised HSBC on this complex and novel transaction, which adds to our market leading experience in commercial mortgage backed securitisation transactions and our growing relationship with HSBC in this area. The deal has helped Scottish Widows Investment Partnership to substantially reduce debt costs for one of its property investment funds, using a debt structure which has been tailored to combine the flexibility required for the optimal management of their fund with the ability to raise further long and short term debt in a highly efficient manner.”List your legal jobs on the LawFuel Network