Hammerson’s shares jumped 8p following the announcement that it was to buy back €200m of bonds in a move welcomed by analysts.
The REIT’s shares opened up 2% at 417.9p, before losing some ground to trade at around 412p as EG went to press.
The spike came after the company announced an offer to holders of its €700m 4.875% unsecured bonds, which are due to mature in 2015.
It said it would buy the bonds using existing debt facilities, in order to achieve “a lower running cost of debt”. An offer price for the bonds will be determined next Thursday.
Analysts at Espirito Santo said that the buy-back could add up to 2.9% to its full-year earnings per share and that it “marks the latest action by management to enhance income returns”. The consensus forecast for Hammerson’s 2012 EPS is 19.6p
It said: “Assuming that the company refinances this at a marginal cost of debt that it indicates to be circa 2.3%, this would equate to a saving on interest of around £4m pa.”
“Degearing has left Hammerson with a debt structure that is relatively costly and inflexible with an average cost of debt of circa 5%,” it said. The buy-back could reduce this by 20bp to 4.8%. The bank added that the transaction should reduce bond exposure from 78% to 70% of gross debt.
As of 31 March, Hammerson’s borrowings were £2.1bn and its cash balance was £76m. It had unused bank facilities of £704m.
The announcement came alongside an interim management statement revealing that occupancy across the REIT’s £5.7bn portfolio fell by 0.8% to 97.1% from the beginning of the year to 19 April. This was driven by a 1.2% drop in the UK retail portfolio.
In an update on its plans to sell out of offices to focus on retail, it said there had been “a high level of interest in our assets, and we are now evaluating these approaches”.
The news promped speculation of a quick sale rather than an 18-month disposal programme.
BNP Paribas, HSBC and Royal Bank of Scotland are advising Hammerson on the bond tender offer.
