Mall Funding announces upcoming redemption of £119.76 million floaters

By Angela McDaniels

Tacoma, Wash., July 20 - Mall Funding plc will redeem £119,759,844 of its secured floating-rate notes at par plus accrued interest, according to a company news release.

The redemption will be made pro rata among the £1,076,900,000 outstanding principal amount of notes.

Mall LP will prepay £119,759,844 of an inter-company loan from Mall Funding on July 22, and Mall Funding is required to redeem an equal amount of the notes.

As previously reported, Capital & Regional plc held a consent solicitation to restructure the notes. Capital & Regional owns 16.7% of the fund and acts as property and asset manager.

The needed consents were received at a meeting on July 15. The key elements of the restructuring are:

• The maturity date of the inter-company loan was extended by three years to 2015;

• The maturity date of the notes was extended to 2017;

• The margin on the notes will be increased to 0.68% from 0.18% beginning in April 2011;

• The mandatory amortization requirement for the inter-company loan will be reduced to an amount equal to or less than £800 million by December 2012 and £600 million by December 2014;

• A £155 million cash contribution from retained cash held in the partnership account was made. Of this, £50 million is being applied to the prepayment of the inter-company loan and £85 million will be applied to fund leasing incentives, capital expenditure and working capital reserves. The remainder will cover swap breakage costs, consent solicitation fees, various costs of the transaction and contingencies;

• The LTV covenant (defined as outstanding debt divided by gross property value) will be tested from December 2011 and will require that the LTV is equal to or less than 83% in December 2011, 77% in December 2012, 71% in December 2013 and 65% in December 2014;

• The current release price mechanism is suspended until the LTV is at 60% or below and the debt outstanding is equal to £600 million or less. Subject to other conditions being met, this will allow sales of properties where the proceeds received would be below the historically determined release price; and

• Distributions will be restricted until total debt outstanding is £600 million or less and the LTV is 60% or less.

The company offered a consent fee of 25 basis points.

Holders of 75% of the notes had to attend the meeting and 75% of the votes had to be in favor of the resolution in order for it to pass.

The company said that the objective of these proposals was to best position the fund for refinancing and that a maturity extension was needed to allow the fund to delever over time. The proposal will also give the fund the flexibility to sell assets below current release prices and use the proceeds to delever.

Morgan Stanley & Co. International plc (+44 0 20 7677 5040) was the consent solicitation agent.

The Mall Fund invests in community malls in the United Kingdom. It was founded by Capital & Regional, a property asset manager based in London, and Aviva Investors.

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