Housing Securities exchange offer for 8 3/8% debenture stock fails

By Toni Weeks

San Luis Obispo, Calif., March 24 - Housing Securities 2 plc announced the target acceptance size had not been met nor the conditions satisfied or waived for its exchange offer for £72.55 million of the £180.85 million of 8 3/8% debenture stock 2019 issued by Housing Securities Ltd. The offer expired at noon ET on March 21.

As a result, Housing Securities will not be accepting any existing stock for exchange, the extraordinary resolution will not be implemented, and no voting instruction fee will be paid.

As previously reported, investors had tendered £44,825,606 of the 8 3/8% debenture stock as of the close of business on Feb. 14.

The exchange offer had been set to expire on March 12 with pricing set for March 13 and settlement for March 20. On March 11, the company extended the offer to March 21. It began Feb. 4.

The company had offered to issue new sterling-denominated fixed-rate secured bonds in exchange for £72.55 million principal amount of the existing debenture stock.

The company announced on Feb. 27 that stockholders passed the proposal to amend the terms of the debenture stock in connection with the exchange offer at a meeting at 5 a.m. ET on Feb. 27.

The voting instruction fee was to be 0.15%. The payment of the fee was conditional on the issuer announcing that other conditions to the exchange offer had been satisfied or waived.

According to a prior press release, stockholders were to receive the full payment regardless of when they participated in the offer. Originally, those who delivered their exchange instructions after the revocation deadline, noon ET on Feb. 14, would have received a payment reduced by 2%.

Also, exchange instructions received beginning Feb. 17 under the offer were to be accepted in full until the offer cap was reached.

The company said it would not scale down the principal amount of each holder's stock accepted for exchange on a pro rata basis and pari passu if the target acceptance size was exceeded.

The issuer previously said it reserved the right not to accept any exchange instructions.

Pricing for the exchange offer was to reflect the yield to maturity using the exchange yield, which would be the sum of the Stock Benchmark Gilt rate and the exchange spread of 100 basis points.

The proceeds of the stock issue were used to fund secured loans to 18 registered providers of social housing, the company previously said. Seven of the borrowers were asking to extend the maturity of their loans and lower the interest cost and, in some cases, to borrow additional amounts.

The new issue yield was to be set using the bond benchmark Gilt rate and a new spread of 120 bps.

The new issue price was to be as close as possible to 100% of the nominal amount of the new bonds.

The exchange offer was conditioned on a minimum amount of £38.5 million of net cash proceeds from the issue of additional new bonds and on a minimum of £72.55 million principal amount of the stock offered for exchange.

The dealer manager was Deutsche Bank AG, London Branch (+44 20 7545 8011, attn: liability management, e-mail: liability.management@db.com). The receiving agent was Computershare Investor Services plc (corporate action projects, +44 0 870 707 1060, investorcentre.com/contactus).

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