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UPP Prepares $600 Million Bond Sale Backed by Student Rooms

UPP Group Holdings Ltd., the U.K.’s second-largest student housing operator, is preparing a debut bond issue after being acquired by a Dutch pension fund and a Chinese bank.

The notes may total about 390 million pounds ($600 million) with a maturity of more than 30 years, according to a Standard & Poor’s report. The deal will include fixed-rate and inflation-linked portions, S&P said. Meetings with investors begin tomorrow, according to a person familiar with the deal.

UPP hired Barclays Plc, Royal Bank of Canada, Royal Bank of Scotland Group Plc and UBS AG for a 5 billion-pound program of bonds backed by rent from 9,000 rooms at six U.K. universities including York, Nottingham and Oxford Brookes, according to the company’s website. The notes will be sold by its UPP Bond Issuer 1 plc unit.

Jon Wakeford, UPP’s London-based head of communications, declined to comment on the sale.

Proceeds of the sale will be used to refinance loans, Standard & Poor’s said. S&P said it expects to rate the notes A- , its fourth-lowest investment grade. Moody’s Investors Service said it would rate the notes at Baa1, a level lower.

Barclays’ infrastructure unit sold a 60 percent stake in UPP to Dutch pension-fund manager PGGM NV in September in a transaction that valued the company at about 1.4 billion pounds, including debt. A unit of the state-run People’s Bank of China bought the remainder of the company earlier this year, according to the initial bond document.

U.K. student property deals surged last year as a rise in foreign students helped fuel demand for dormitory rooms. Companies including Mansion Student Accommodation Fund and operators backed by buyout firms Oaktree Capital Management LP and Carlyle Group LP invested 800 million pounds on student homes in the first half, Jones Lang LaSalle Inc. estimated.

UPP managed dormitories for 13 universities in the U.K., housing 26,406 students and generating annual rental income of 104 million pounds in the year to September 2012.

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