SGS to boost new three-year strategy with £87m facility

SGS Finance, which manages four former intu centres, is setting up a new £86.9m “super senior” facility as part of measures to support a three-year restructuring and exit strategy. The propco– which holds the Lakeside centre in Essex, Watford’s Atria shopping centre, Nottingham’s Victoria Centre and the Braehead Shopping Centre – has launched a fifth consent solicitation to its bondholders. The proposals underpin a new three-year restructuring plan for the centres, including £112m of investment in capital projects to facilitate new lettings and boost occupancy. SGS is planning an exit towards the end of that strategy. Terms have been agreed on an £86.9m “super senior” credit facility, which will support the restructuring. Of this, £32.7m will be used to refinance existing additional liquidity facilities. The company is also seeking to extend the maturity date on its £450m Series 1 note and term loan by a year to March 2024, with scope to extend further to December 2025 if “certain milestones” are met. Original notionals would remain the same, with interest paid on a ‘pay if you can’ basis. Voting on the proposals will take place on 12 July. SGS requires unanimous approval from its term loan lenders, and votes in favour by at least 75% of each of the three series of its bonds. The majority of lenders have so far signalled their support for the plan. All term loan lenders and noteholders representing around 85% of the outstanding principal amount have indicated they will vote in favour, and 52% of the notes have acceded to a lock-up agreement. Lending secured against SGS currently comprises £1.05bn in bonds due across three tranches between 2023 and 2030, as well as a loan of £142m due in 2024. Exit strategy The company is launching the consent solicitation after a “comprehensive” strategic review. It has drawn up a three-year business plan focusing on five priorities: creating a stable income profile; repositioning assets for the future; improving operational costs; diversifying return drivers to include alternative uses; and monetising ancillary properties. The propco aims to improve net rental income to £78m in its 2023 financial year. Steve Gray, head of European retail asset management at Global Mutual, the asset manager for the centres, said: “The launch of this consent solicitation is another important milestone for SGS’s four shopping centres, and represents further progress towards securing their long-term financial stability. The proposals outlined will place us in a strong position to deliver our three-year business plan and exit strategy. “Our latest operational update provides further cause for optimism. Footfall and trading levels show promising recovery, while rental and service charge collection rates also continue to improve. “The team has also done an excellent job in signing a range of new leasing deals as tenants continue to show strong appetite in taking space in our centres.” Rent collection rates across the four centres reached 61% during Q1 this year, up 36% from Q3 last year. It has also received 68% of service charges owed, compared with 44% in the third quarter. Earlier this week, the Victoria Centre secured leasing deals with a number of firms including footwear retailer Skechers, bike manufacturer Ribble Cycles and high street bank TSB. John Lewis Partnership also signed for a pop-up showroom featuring its Anyday range. To send feedback, e-mail pui-guan.man@eg.co.uk or tweet @PuiGuanM or @EGPropertyNews