Redefine enters debt restructuring agreement with Aviva Commercial

By Caroline Salls

Pittsburgh, Oct. 17 - Redefine International plc agreed to a debt restructuring and revised arrangements with Aviva Commercial Finance Ltd. in connection with the company's U.K. shopping center portfolio, according to a news release.

The agreement will reduce the Redefine group's loan to value ratio on a see-through basis to 57.3% from 63.7% following a previously announced acquisition.

As part of the arrangements, the company exchanged contracts to purchase the Weston Favell Shopping Centre.

Restructuring terms

Redefine said the transaction will result in a restructuring of the Aviva debt secured against Grand Arcade Shopping Centre and West Orchards Shopping Centre.

The debt against the West Orchards property will be repaid in cash from the company's existing cash reserves at the current £37 million market value of the property and will result in the property becoming unencumbered.

The debt against the Grand Arcade property will be reduced by roughly 50% to £73 million in consideration for a cash payment of £7 million, also from the company's existing cash reserves.

Redefine said it will assume 100% ownership, but Aviva will retain the right to participate in 50% of the income and capital growth generated by Grand Arcade going forward. The company will have the right to buy back the profit share for a maximum cash payment of £18.5 million in five installments upon the valuation of Grand Arcade increasing by agreed benchmarks.

Following completion of the transaction, the facilities currently provided by Aviva in connection with shopping centers at Birchwood and Byron Place, as well as Grand Arcade, will be cross collateralized with the facility to be provided for Weston Favell.

The company said the restructuring will enable the property owning companies to continue operating as going concerns and will also ensure that the third party creditors, other than Aviva, of the property owning companies are settled in full.

"This transaction not only produces a reduction in the company's see-through leverage ratio, but is expected to be earnings accretive from day one," Redefine International chairman Greg Clarke said in the release.

The transaction is expected to be complete by Dec. 6.

Weston Favell purchase

As part of the arrangements with Aviva, contracts have been exchanged for the purchase of Weston Favell Shopping Centre for a total consideration of £84 million. Aviva will provide Redefine International with a finance facility of £50 million, with the balance of the purchase consideration being funded by internal cash resources.

The interest rate on this Aviva facility will be fixed at 5.7%, and the loan will be repayable in November 2038.

According to the release, one of the conditions to the acquisition of Weston Favell is that it may be subject to JSE listings requirements, which may require the approval by Redefine Properties International Ltd.-linked unitholders.

The unitholders' approval would be required if the unbundling of the Redefine International shares held by holding company Redefine Properties and the de-listing of Redefine Properties from the JSE are not implemented.

Redefine is an Isle of Man-based property company.

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