This year’s award for Loans Below £750m went to Balanced Commercial Property Trust (BCPT), managed by Columbia Threadneedle Investments, for its £320m dual-tranche facility. The trust, a FTSE-250 closed-ended REIT, is subject to continuation votes, with the next vote due in 2024.
Ahead of the upcoming maturities of existing facilities and vote, BCPT was looking to refinance its existing debt to bridge the vote and maximise flexibility around its outcome, while maintaining competitive pricing and retaining most of the favourable terms of its existing term loan.
At the same time, BCPT needed to plan for a range of vote outcomes, from the extension of the trust to its discontinuation via orderly disposals.
While the existing term loan terms were highly favourable, new fixed-rate debt with material prepayment penalties was not an attractive option. With the incumbent institutional lender unable to provide a suitable alternative, BCPT worked with EY to adopt a bespoke financing structure.
The resulting two-year facility (with two one-year extension options) included a £60m RCF and a committed ‘springing’ £260m term loan, which could only be drawn to refinance the existing institutional term loan.
Consequently, if the trust is extended, BCPT can refinance its existing institutional term loan ahead of maturity, through either the incumbent lender or bank lenders, or via a wider long-term capital markets solution. If market conditions prove unattractive, the trust can draw down on the springing term loan to refinance the maturing existing institutional term loan, thereby removing near-term refinancing risk.
The new facility therefore enables the trust to avoid the higher costs of extending the institutional term loan, while preserving future financing options following the continuation vote.
The transaction is believed to be the first of its kind in this sector, with a unique structure that is designed to manage current financing costs in a heightened rates environment, while also giving the trust both flexibility and funding certainty.
Uncertainty over the continuation of the Trust going forward presented a challenge, but BCPT created a unique fit-for-purpose financing structure that gives them flexibility going forward.
VIVID, a provider of affordable homes and support services in the south of England, was highly commended for its £110m package to refinance its £80m secured RCF that included a £50m secured green loan believed to be the first of its kind in the housing association sector, as well as a £60m unsecured sustainability-linked revolving credit facility.