Following on the coattails of U.K. supermarket chain J. Sainsbury's benchmark sale and leaseback securitization in March (ASRI 3/13/2000 and 12/13/1999 p.2), other British retail groups are now looking to see whether securitization is a good financing option.
Representatives from companies such as electrical goods retailer Dixons, travel agents Thomas Cook and the Post Office attended a seminar hosted by the law firm Titmuss Sainer Dechert in London recently.
The companies were there to examine the potential benefits of property securitization for retailers and to further their understanding. And, although there was some confused head-scratching as Titmuss' lawyers explained some of the more technical ins-and-outs of the techniques involved, the overall feeling of the assembled parties seemed to be fairly positive.
A representative from the Post Office explained that he was in attendance to see what all the fuss was about, and indicated that he would be going back to the business with the message: "this is something we should take seriously".
"Securitization definitely seems to be the current flavor of the month," he said. "Obviously, the off-balance sheet benefits are of interest, as well as the possibility that it offers cheaper financing."
Post Office tenants, he added, would see the benefit of this technique as opposed to the traditional leases they were used to. "Normally, we are used to seeing a five-year uplift on lease payments, which typically increase more than operating profits for the same period," he said. "Securitization seems to offer an alternative to this, and that transfers power back into the hands of the tenants."
Despite the enthusiasm shown for the secured bond alternative, it should not be taken for granted that retail groups will be making a mad dash to get deals issued. For one thing, it is likely that one of the companies will need to take a lead before the others follow.
The Sainsbury's GBP335 million ($502 million) Highbury Finance transaction remains the only property securitization launched by a U.K. retailer and, although Boots and Marks & Spencer have also been linked with possible deals, nothing concrete has been announced.