Wesfarmers Raises A$304 Million With Lease Securitization DealBenjamin Purvis
Wesfarmers Ltd., Australia’s largest employer, raised about A$304 million ($272 million) through a transaction that involves the sale and leaseback of properties in its Bunnings Warehouse hardware store chain.
The conglomerate with businesses including supermarkets, coal mining and insurance, is selling and renting back 15 properties to a special purpose entity funded by a lease securitization structure, according to a regulatory filing. The purchase will be primarily funded with the proceeds of 12-year senior secured partially amortizing floating-rate notes which were today priced to yield 215 basis points more than the bank bill swap rate, it said.
The secured notes will be serviced by rental revenues from the properties and also carry a guarantee from Wesfarmers, according to ratings company Standard & Poor’s, which assigned them a preliminary rating of A-.
“The lease securitization represents a continuation of Wesfarmers’ strategy to release capital from its balance sheet,” the company’s Finance Director Terry Bowen said in the filing. “Given the depth of Bunnings new store pipeline and high rate of conversion into trading locations, the group will continue its strong focus on recycling capital as these stores are completed.”
The special-purpose entity today sold A$270.89 million of the secured notes which have a weighted-average life of 10.3 years, according to an e-mailed statement from Westpac Banking Corp., which helped managed the note sale. CIMB Group Holdings Bhd and Goldman Sachs Group Inc. were also sale managers and acted as joint structuring advisers. The transaction was also expected to include about A$33 million of residual value notes, according to S&P.
The structure, which released about A$287 million of capital for Perth-based Wesfarmers, may be used again should market conditions permit, the company said.
Today’s transaction follows the sale and leaseback earlier this month of a portfolio of 10 other Bunnings properties to BWP Trust, according to Wesfarmers’ statement.