The Canary Wharf Group recently launched its second securitization of properties on its huge Docklands site in London. Salomon Smith Barney structured the deal and also acted as bookrunner along with Morgan Stanley Dean Witter.

Called Canary Wharf Finance 2, the GBP475 million ($712 million) multi-currency deal is smaller than the first GBP555 million transaction, launched in November 1997. It will be backed by lease payments on three buildings currently occupied by Citibank, Credit Suisse First Boston and the oil company Texaco, as well as some additional retail outlets and parking spaces.

The deal - which was launched into difficult markets for fixed rate products, due to widening swap spreads - has been split into five tranches, including four fixed rate sterling notes and a Euro-denominated floating rate tranche. The Euro notes widened the appeal of the issue to buyers of shorter-dated paper, as well as the traditional buyers of bonds with longer maturities.

Both the 20.1 year average life GBP240 million A1 notes and the 6.1 year E100 million A2 floating rate tranche received an Aaa rating from Moody's Investors Service and AAA from Standard & Poor's and Fitch IBCA. The A1 tranche has a coupon of 6.455% and priced at 175 basis points over Gilts, while the A2 floater was 30 over three-month Euribor.

Additionally, three subordinated fixed rate tranches have been structured into the deal. The GBP85 million B tranche - rated Aa2 by Moody's and AA by S&P and Fitch - has an average life of 20.9 years with a 6.8% annual coupon. The GBP45 million C paper - rated A2 and A - carries an average life of 20 years with a 6.46% coupon. The junior GBP45 million D tranche has an average life of 25.1 years.

It is understood that the Canary Wharf Group itself bought at least one of the lowest tranches. The company may sell them in the secondary market at a later date.

The transaction also included GBP250 million of variable funding notes, rated triple-A and double-A, which Salomon placed privately prior to the official launch. The notes commit investors to let Canary Wharf draw down funds up to the maximum of GBP250 million

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