After writing down the value of its mall portfolio by more than $4 billion in its interim accounts, Scentre Group has gone to the US market and raised US$3 billion in a subordinated hybrid note issue.
The Group had hoped to raise US$1.5 – US$2 billion, but accepted substantially more, offering attractive high yields.
The hybrid note issue comprises:
– US$1.5 billion 60-year, non-call 6-year subordinated notes with a coupon of 4.75%
– US$1.5 billion 60-year, non-call 10-year subordinated notes with a coupon of 5.125%
The Group can redeem the notes at par with cash from the call date. The notes do not contain any equity conversion features.
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Being part debt and part equity, the notes receive 50% equity credit from the rating agencies on the issue, limiting the impact on debt ratios and thus the Group’s credit ratings.
Importantly, the hybrid notes are not included as liabilities for the Group’s bank and bond covenants.
On this basis, the company calculates on the basis of 30 June 2020 accounts, debt to EBITDA would be 6.4 times and pro forma gearing would be 27.6%.
Scentre Group now has sufficient long term liquidity to cover all debt maturities until early 2024.
