Supermarket giant Tesco has raised £960m from issuing bonds secured against 41 of its supermarkets in the first UK securitised debt deal this year, and the largest since the downturn began.
The bonds were issued at an interest rate margin of 165 basis points over gilt yields. The rating of the bonds is high due to the strong corporate creditworthiness of Tesco, rating agencies said.
The bonds are secured against 41 Tesco supermarkets across the country, and will carry a fixed interest rate.
Tesco undertook two similar commercial mortgage-backed securities deals last year, raising just less than £1bn. The new deal, called Tesco Property Finance 3, is the largest securitised bond issuance in the UK or Europe since 2007.
The bonds are likely to be bought by pension funds and other institutional investors, because the long-dated bonds will match their own liabilities.
The property market has been looking for ways to revive the moribund CMBS sector in order to get banks lending again. While the new deal is a sign that investors will buy bonds secured by high-quality property with strong tenants like Tesco, appetite for bonds secured against riskier property remains low.
