Investors clamour for British Land debt issue

Demand for British Land's convertible bond issue has been strong, enabling the company to increase the size of the issue on terms favourable to the company.

British Land has taken up the option to boost the size of the offering from £300m to £400m on the back of strong demand.

The coupon of the bond issue, announced on Tuesday, has been set at 1.5%, and the initial conversion price of the bonds into British Land shares has been set at 693.07p, a premium of 31.25% above the volume weighted average price of the shares from launch to pricing.

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up

The company had indicated that the coupon would be somewhere between 1.375% and 1.875%, so the interest rate it has been obliged to offer to get the issue away is in the bottom half of the range. Furthermore, the conversion price premium of 31.25% is near the top end of the indicated range of 27.5% to 32.5%, offering another indication of the keen market demand for British Land debt.

The bonds are set to be redeemed or converted (subject to the satisfaction of certain conditions) into shares in 2017, with options in place to buy them in two years earlier.

If fully converted, the bonds would represent somewhere close to 7% of the company's issued share capital. Under the terms of the bond issue the company will have the right to elect to settle any conversion entirely in shares, cash or a combination of shares and cash.

Settlement is expected to take place on or around September 10th.

Lucinda Bell, Finance Director of British Land, was understandably delighted with the response to the bond issue. "Taking advantage of favourable market conditions, we have accessed a new source of finance to raise 5 year term debt at a coupon of 1.5%, with flexible settlement options if converted. The issue size has been increased to take up some of the over-subscription from investors," she said.

The company said the funds raised would pay off money borrowed to make acquisitions, including the £129.6m acquisition of the Clarges estate in prestigious Mayfair, with plenty left over to support development spending.

JH