Sainsbury's, the U.K. supermarket group, is set to become the latest struggling British retailing giant to turn to property securitization in an effort to revive flagging fortunes.
A Sainsbury's official confirmed that a CMBS deal is likely but said that a final decision would not be made until January next year. The official said that a mandate had yet to be awarded but was unable to confirm market rumors that Deutsche Bank A.G. are set to be the selected bank.
However, market sources suggested that plans are well advanced for a bond backed by 17 of the company's largest out of town stores, with Sainsbury's selling and leasing back the stores to create the cashflows.
A deal is likely to be worth between GBP250 million and GBP300 million ($400 million to $480 million), but could be just the first in a series that will eventually raise up to GBP1 billion.
Retail analysts added that the retailer's freehold property portfolio is currently worth about GBP5.5 billion.
The move comes on the heels of confirmation that Marks & Spencer, another high street giant going through difficult times, is working with Morgan Stanley Dean Witter & Co. to securitize part of its non-retail property portfolio in an effort to increase shareholder value.
Analysts suggested that an emphasis on shareholder value is one reason why Sainsbury's may turn to MBS, but added that the cash raised and the consequent deleveraging is also likely to be a defensive measure to defend against a possible takeover bid.