Pillar has refinanced £375m of bank debt with novel financing from HVB Real Estate Capital.
The conventional loans on three retail parks have been replaced by “conduit financing” – a nine-year loan, which HVB has itself financed through a commercial paper programme.
“It is a securitisation, but under the umbrella of HVB, so it has the benefit of HVB’s credit rating,” said Pillar’s finance director, Humphrey Price. “We gain flexibility and the low pricing attached to the issue. It’s extremely low cost debt.”
The loan to Pillar, backed by the three parks, was put into an HVB conduit – that is, a special purpose vehicle that pools asset-backed loans and uses them to raise cheaper finance in the capital markets.
“High-quality commercial paper trades typically at around LIBOR or slightly less. We shared the funding efficiencies with the client,” said Mike White, HVB’s joint managing director.
Price said the intention was still to put the three parks – Fort Kinnaird, Edinburgh; Broughton Park, Chester; and Deepdale Retail Park, Preston – into Pillar’s Hercules Property Unit Trust. The new loan can be transferred with the properties at minimal cost.
Pillar is taking a £13m hit on unwinding some of the original debt, and associated hedging, but expects to save £3m a year in interest.
