19 November 2020
NOT FOR DISTRIBUTION IN OR INTO THE UNITED STATES OR INTO, AUSTRALIA, CANADA, JAPAN OR ANY OTHER JURISDICTION IN WHICH SUCH DISTRIBUTION WOULD BE PROHIBITED BY APPLICABLE LAW
CAPITAL & COUNTIES PROPERTIES PLC
(“Capco” or the “Issuer”)
Exchangeable Bond Offering
Capital & Counties Properties PLC today announces the launch of an offering (the “Offering”) of approximately £250 million of Secured Exchangeable Bonds due 2026, exchangeable for ordinary shares of Shaftesbury PLC (“Shaftesbury”) (the “Bonds”).
Capco is positioned as a strongly capitalised prime central London REIT centred around its world-class Covent Garden estate. Whilst COVID-19 has had a significant impact on Capco’s customers and business in the near term, Capco continues to believe in the long-term prospects and resilience of prime central London and in particular the West End.
Capco has a shareholding of 25.2 per cent in Shaftesbury shares, as a result of committing to acquire 80.72 million shares for 540 pence per share in May 2020 and a further 16.25 million shares for 400 pence per share in October 2020. These investments were priced attractively and are consistent with Capco’s strategy to invest in attractive opportunities on or near the Covent Garden estate.
Capco continues to actively manage its portfolio of assets with a focus on creating long-term value for shareholders as well as maintaining a strong balance sheet and significant liquidity to manage the business through current market uncertainty and to position it for long-term growth.
Rationale and use of proceeds
Capco intends to use the net proceeds of the Offering for general corporate purposes and to reduce its borrowings under the Covent Garden revolving credit facility. Capco believes that the Offering will enhance Capco's financial position, providing a more appropriate funding balance across the group while also allowing it to diversify medium term sources of finance, extend its maturity profile and keep its cost of debt low. The Offering will provide additional financial flexibility and liquidity to Capco.
Based on Capco's net debt of £721 million and the independent valuation of Capco's property portfolio as at 30 June 2020, together with the proceeds of £76.5 million from the sale of the Wellington Block received in October 2020, deferred consideration of £105 million to be received in November 2020 in connection with the sale of Earls Court and payments of £88 million and £65 million for Shaftesbury shares in August and November 2020, Capco’s net debt to total gross assets would continue to be approximately 25 per cent following the issue of the Bonds. On the same basis, the loan to value ratio for Covent Garden would be reduced to 24 per cent (30 June 2020: 36 per cent).
Following the issue of the Bonds, Capco will have access to approximately £890 million of cash and undrawn facilities.
The shares to be pledged in connection with the Bonds are expected to represent approximately one-third of Capco's shareholding. Capco retains the right to settle any exchange of the Bonds in Shaftesbury shares, cash or a combination of Shaftesbury shares and cash.
Offering of Bonds
The Bonds will be issued by Capital & Counties Properties PLC and will represent unsubordinated and secured obligations of the Issuer. The Bonds will be issued at par and are expected to carry a coupon of between 1.50 and 2.00 per cent per annum payable semi-annually in arrears in equal instalments and will, subject to certain conditions, be exchangeable into fully paid ordinary shares of Shaftesbury (the “Shares”) or, at the election of the Issuer, a cash alternative amount. The initial exchange price (the “Exchange Price”) is expected to be set at a premium of between 35 and 40 per cent to the volume weighted average price of a Share on the London Stock Exchange between launch and pricing today.
The Issuer will grant a first ranking pledge over the secured collateral, composed initially of approximately nine per cent of the issued shares of Shaftesbury PLC at the date hereof. Under the terms of the Bonds, the Issuer will have the right to elect to settle any exchange in Shares, cash or a combination of Shares and cash. The secured collateral will be subject to adjustment in certain circumstances in line with market practice.
The Issuer will have the option to increase the Offering size prior to pricing by up to £25 million.
Settlement of the Bonds is expected to take place on or around 30 November 2020 (the “Settlement Date”). If not previously exchanged, redeemed or purchased and cancelled, the Bonds will be redeemed at par on 30 March 2026. The Issuer will have the option to redeem all outstanding Bonds (i) on or after the date falling 21 days after the interest payment date falling on March 2024 at par plus accrued interest if the value of the Shares underlying £100,000 in principal amount of the Bonds equals or exceeds £130,000 for at least 20 out of 30 consecutive trading days (ii) as specified in the terms and conditions of the Bonds, in the event of an offer or scheme of arrangement relating to the Shares where the consideration consists wholly of cash or (iii) at any time, if 85 per cent or less of the principal amount of the Bonds remains outstanding.
Capco has agreed to a lock-up ending 90 days after the Settlement Date for its Shares, subject to certain exceptions.
The final terms of the Bonds are expected to be announced through a press release once the bookbuilding process is completed. Application is intended to be made for the Bonds to be admitted to trading on the unregulated open market (Freiverkehr) of the Frankfurt Stock Exchange.
BNP PARIBAS, HSBC and UBS are acting as Joint Global Coordinators and Joint Bookrunners for the Offering.
The person responsible for arranging the release of this announcement is Ruth Pavey, Company Secretary.
Capital & Counties Properties PLC
+44 (0)20 3214 9188
Chief Financial Officer
+44 (0)20 3214 9183
Head of Commercial Finance & Investor Relations
+44 (0)20 3214 9165
This press release relates to the disclosure of information that qualified, or may have qualified, as inside information within the meaning of Article 7(1) of the EU Market Abuse Regulation.
About Capital & Counties Properties PLC (“Capco”)
Capital & Counties Properties PLC is one of the largest listed property investment companies in central London and is a constituent of the FTSE-250 Index. Capco's landmark estate at Covent Garden was valued at £2.2 billion (as at 30 June 2020) where its ownership comprises over 1.2 million square feet of lettable space. As at the date hereof, Capco owns a 25.2 per cent shareholding in Shaftesbury PLC. Capco shares are listed on the London Stock Exchange and the Johannesburg Stock Exchange.
IMPORTANT NOTICE IN RELATION TO THE BONDS
NO ACTION HAS BEEN TAKEN BY THE ISSUER, THE JOINT BOOKRUNNERS OR ANY OF THEIR RESPECTIVE AFFILIATES THAT WOULD PERMIT AN OFFERING OF THE BONDS OR POSSESSION OR DISTRIBUTION OF THIS PRESS RELEASE OR ANY OFFERING OR PUBLICITY MATERIAL RELATING TO THE BONDS IN ANY JURISDICTION WHERE ACTION FOR THAT PURPOSE IS REQUIRED. PERSONS INTO WHOSE POSSESSION THIS PRESS RELEASE COMES ARE REQUIRED BY THE ISSUER AND THE JOINT BOOKRUNNERS TO INFORM THEMSELVES ABOUT, AND TO OBSERVE, ANY SUCH RESTRICTIONS.
THIS PRESS RELEASE IS NOT FOR DISTRIBUTION, DIRECTLY OR INDIRECTLY IN OR INTO THE UNITED STATES. THIS PRESS RELEASE IS NOT AN OFFER TO SELL SECURITIES OR THE SOLICITATION OF ANY OFFER TO BUY SECURITIES, NOR SHALL THERE BE ANY OFFER OF SECURITIES IN ANY JURISDICTION IN WHICH SUCH OFFER OR SALE WOULD BE UNLAWFUL.
THIS PRESS RELEASE AND THE OFFERING WHEN MADE ARE ONLY ADDRESSED TO, AND DIRECTED IN THE UNITED KINGDOM AND MEMBER STATES OF THE EUROPEAN ECONOMIC AREA (THE “EEA”) AT PERSONS WHO ARE “QUALIFIED INVESTORS” WITHIN THE MEANING OF THE PROSPECTUS REGULATION (“QUALIFIED INVESTORS”). FOR THESE PURPOSES, THE EXPRESSION "PROSPECTUS REGULATION" MEANS REGULATION (EU) 2017/1129.
SOLELY FOR THE PURPOSES OF THE PRODUCT GOVERNANCE REQUIREMENTS CONTAINED WITHIN: (A) EU DIRECTIVE 2014/65/EU ON MARKETS IN FINANCIAL INSTRUMENTS, AS AMENDED (“MIFID II”); (B) ARTICLES 9 AND 10 OF COMMISSION DELEGATED DIRECTIVE (EU) 2017/593 SUPPLEMENTING MIFID II; AND (C) LOCAL IMPLEMENTING MEASURES (TOGETHER, THE “MIFID II PRODUCT GOVERNANCE REQUIREMENTS”), AND DISCLAIMING ALL AND ANY LIABILITY, WHETHER ARISING IN TORT, CONTRACT OR OTHERWISE, WHICH ANY “MANUFACTURER” (FOR THE PURPOSES OF THE MIFID II PRODUCT GOVERNANCE REQUIREMENTS) MAY OTHERWISE HAVE WITH RESPECT THERETO, THE BONDS HAVE BEEN SUBJECT TO A PRODUCT APPROVAL PROCESS, WHICH HAS DETERMINED THAT: (I) THE TARGET MARKET FOR THE BONDS IS ELIGIBLE COUNTERPARTIES AND PROFESSIONAL CLIENTS ONLY, EACH AS DEFINED IN MIFID II; AND (II) ALL CHANNELS FOR DISTRIBUTION OF THE BONDS TO ELIGIBLE COUNTERPARTIES AND PROFESSIONAL CLIENTS ARE APPROPRIATE. ANY PERSON SUBSEQUENTLY OFFERING, SELLING OR RECOMMENDING THE BONDS (A "DISTRIBUTOR") SHOULD TAKE INTO CONSIDERATION THE MANUFACTURERS’ TARGET MARKET ASSESSMENT; HOWEVER, A DISTRIBUTOR SUBJECT TO MIFID II IS RESPONSIBLE FOR UNDERTAKING ITS OWN TARGET MARKET ASSESSMENT IN RESPECT OF THE BONDS (BY EITHER ADOPTING OR REFINING THE MANUFACTURERS’ TARGET MARKET ASSESSMENT) AND DETERMINING APPROPRIATE DISTRIBUTION CHANNELS.
THE TARGET MARKET ASSESSMENT IS WITHOUT PREJUDICE TO THE REQUIREMENTS OF ANY CONTRACTUAL OR LEGAL SELLING RESTRICTIONS IN RELATION TO ANY OFFERING OF THE BONDS.
FOR THE AVOIDANCE OF DOUBT, THE TARGET MARKET ASSESSMENT DOES NOT CONSTITUTE: (A) AN ASSESSMENT OF SUITABILITY OR APPROPRIATENESS FOR THE PURPOSES OF MIFID II; OR (B) A RECOMMENDATION TO ANY INVESTOR OR GROUP OF INVESTORS TO INVEST IN, OR PURCHASE, OR TAKE ANY OTHER ACTION WHATSOEVER WITH RESPECT TO THE BONDS.
THE BONDS ARE NOT INTENDED TO BE OFFERED, SOLD OR OTHERWISE MADE AVAILABLE TO AND SHOULD NOT BE OFFERED, SOLD OR OTHERWISE MADE AVAILABLE TO ANY RETAIL INVESTOR IN THE EEA OR THE UNITED KINGDOM. FOR THESE PURPOSES, A RETAIL INVESTOR MEANS A PERSON WHO IS ONE (OR MORE) OF: (I) A RETAIL CLIENT AS DEFINED IN POINT (11) OF ARTICLE 4(1) OF MIFID II; OR (II) A CUSTOMER WITHIN THE MEANING OF DIRECTIVE (EU) 2016/97, WHERE THAT CUSTOMER WOULD NOT QUALIFY AS A PROFESSIONAL CLIENT AS DEFINED IN POINT (10) OF ARTICLE 4(1) OF MIFID II. CONSEQUENTLY, NO KEY INFORMATION DOCUMENT REQUIRED BY REGULATION (EU) NO 1286/2014, AS AMENDED (THE "PRIIPS REGULATION") FOR OFFERING OR SELLING THE BONDS OR OTHERWISE MAKING THEM AVAILABLE TO RETAIL INVESTORS IN THE EEA OR THE UNITED KINGDOM HAS BEEN PREPARED AND THEREFORE OFFERING OR SELLING THE BONDS OR OTHERWISE MAKING THEM AVAILABLE TO ANY RETAIL INVESTOR IN THE EEA OR THE UNITED KINGDOM MAY BE UNLAWFUL UNDER THE PRIIPS REGULATION.
IN ADDITION, IN THE UNITED KINGDOM THIS PRESS RELEASE IS BEING DISTRIBUTED ONLY TO, AND IS DIRECTED ONLY AT, QUALIFIED INVESTORS (I) WHO HAVE PROFESSIONAL EXPERIENCE IN MATTERS RELATING TO INVESTMENTS FALLING WITHIN ARTICLE 19(5) OF THE FINANCIAL SERVICES AND MARKETS ACT 2000 (FINANCIAL PROMOTION) ORDER 2005, AS AMENDED (THE “ORDER”) AND QUALIFIED INVESTORS FALLING WITHIN ARTICLE 49(2)(A) TO (D) OF THE ORDER, AND (II) TO WHOM IT MAY OTHERWISE LAWFULLY BE COMMUNICATED (ALL SUCH PERSONS TOGETHER BEING REFERRED TO AS “RELEVANT PERSONS”). THIS PRESS RELEASE MUST NOT BE ACTED ON OR RELIED ON (I) IN THE UNITED KINGDOM, BY PERSONS WHO ARE NOT RELEVANT PERSONS, AND (II) IN ANY MEMBER STATE OF THE EEA, BY PERSONS WHO ARE NOT QUALIFIED INVESTORS. ANY INVESTMENT OR INVESTMENT ACTIVITY TO WHICH THIS PRESS RELEASE RELATES IS AVAILABLE ONLY TO (A) RELEVANT PERSONS IN THE UNITED KINGDOM AND WILL BE ENGAGED IN ONLY WITH RELEVANT PERSONS IN THE UNITED KINGDOM AND (B) QUALIFIED INVESTORS IN MEMBER STATES OF THE EEA.
NO OFFERS OR SALE OF THE BONDS WILL BE MADE IN OR INTO SOUTH AFRICA.
ANY DECISION TO PURCHASE ANY OF THE BONDS SHOULD ONLY BE MADE ON THE BASIS OF AN INDEPENDENT REVIEW BY A PROSPECTIVE INVESTOR OF THE ISSUER’S AND SHAFTESBURY’S PUBLICLY AVAILABLE INFORMATION. NEITHER THE JOINT BOOKRUNNERS NOR ANY OF THEIR RESPECTIVE AFFILIATES ACCEPT ANY LIABILITY ARISING FROM THE USE OF, OR MAKE ANY REPRESENTATION AS TO THE ACCURACY OR COMPLETENESS OF, THIS PRESS RELEASE OR THE ISSUER’S AND SHAFTESBURY’S PUBLICLY AVAILABLE INFORMATION. THE INFORMATION CONTAINED IN THIS PRESS RELEASE IS SUBJECT TO CHANGE IN ITS ENTIRETY WITHOUT NOTICE UP TO THE SETTLEMENT DATE.
EACH PROSPECTIVE INVESTOR SHOULD PROCEED ON THE ASSUMPTION THAT IT MUST BEAR THE ECONOMIC RISK OF AN INVESTMENT IN THE BONDS OR THE ORDINARY SHARES TO BE ISSUED OR TRANSFERRED AND DELIVERED UPON EXCHANGE OF THE BONDS AND NOTIONALLY UNDERLYING THE BONDS (TOGETHER WITH THE BONDS, THE “SECURITIES”). NONE OF THE ISSUER OR THE JOINT BOOKRUNNERS MAKE ANY REPRESENTATION AS TO (I) THE SUITABILITY OF THE SECURITIES FOR ANY PARTICULAR INVESTOR, (II) THE APPROPRIATE ACCOUNTING TREATMENT AND POTENTIAL TAX CONSEQUENCES OF INVESTING IN THE SECURITIES OR (III) THE FUTURE PERFORMANCE OF THE SECURITIES EITHER IN ABSOLUTE TERMS OR RELATIVE TO COMPETING INVESTMENTS.
THE JOINT BOOKRUNNERS ARE ACTING ON BEHALF OF THE ISSUER AND NO ONE ELSE IN CONNECTION WITH THE BONDS AND WILL NOT BE RESPONSIBLE TO ANY OTHER PERSON FOR PROVIDING THE PROTECTIONS AFFORDED TO CLIENTS OF THE JOINT BOOKRUNNERS OR FOR PROVIDING ADVICE IN RELATION TO THE SECURITIES.
EACH OF THE ISSUER, THE JOINT BOOKRUNNERS AND THEIR RESPECTIVE AFFILIATES EXPRESSLY DISCLAIMS ANY OBLIGATION OR UNDERTAKING TO UPDATE, REVIEW OR REVISE ANY STATEMENT CONTAINED IN THIS PRESS RELEASE WHETHER AS A RESULT OF NEW INFORMATION, FUTURE DEVELOPMENTS OR OTHERWISE.
This press release contains certain forward-looking statements about the future outlook of the Issuer. By their nature, any statements about future outlook involve risk and uncertainty because they relate to events and depend on circumstances that may or may not occur in the future. Actual results, performance or outcomes may differ materially from any results, performance or outcomes expressed or implied by such forward-looking statements.
No representation or warranty is given in relation to any forward-looking statements made by the Issuer or any of the Joint Bookrunners, including as to their completeness or accuracy. The Issuer does not undertake to update any forward-looking statements whether as a result of new information, future events or otherwise. Nothing in this press release should be construed as a profit forecast.
 Based on Shaftesbury share price of 567 pence as at close on 18 November 2020 and base deal size.
 Based on Shaftesbury share price of 567 pence as at close on 18 November 2020 and base deal size.