Co-op goes to bond market for £800m refinancing
THE Co-operative Group is refinancing a big chunk of the debt it incurred in buying Somerfield for £1.5bn two year ago.
The food to farms and funerals provider has turned to the bond markets to refinance £800m of borrowings, which were previously owed to a syndicate of banks under an unsecured term loan.
The bonds are being offered in two tranches – £450m at 5.625% due in 2020 and £350m at 6.25% due 2026.
Both bonds are guaranteed by four group subsidiaries, including the Funeral Services and Co-operative Group Food Ltd. The joint lead managers are Barclays Bank, Lloyds TSB and HSBC.
A spokesman for The Co-operative Group said: “We have moved a substantial part of our borrowings from bank loans to bonds. It’s a matter of financial housekeeping.”
In its prospectus to the issue the group sets out a number of risks, which could impact its future success. These include failing to integrate Somerfield and Britannia Building Society effectively; the ongoing state of the consumer market and reputational damage.
Legal advice to the issuer and the managers was provided by City law firms Linklaters and Allen & Overy. The Manchester office of KPMG is the auditor to the Co-operative Group and its subsidiaries.
