Join our community of smart investors

Hammerson aims to raise £825m via rights issue and disposal

The retail landlord is aiming to cut debt after the value of its portfolio declined further during the first half of the year
August 6, 2020

Hammerson (HMSO) is hoping to raise £825m via a rights issue and by selling its stake in European shopping outlets to its joint-venture partner, in order to reduce leverage by a quarter and increase liquidity.

IC TIP: Sell at 52p

The retail landlord reported a 27 per cent decline in like-for-like net rental income during the first half of the year and reported a £1.1bn operating loss after the value of its portfolio plummeted.

Alongside the rights issue, management intends to undertake a share consolidation, which will result in shareholders owning one consolidated share of 5p for every five existing shares of 25p nominal value. Taking the capital reorganisation into account, the rights issue will result in shareholders receiving 24 shares for every one they own. 

The group has received irrevocable undertakings from its two largest shareholders, APG and Lighthouse Capital, who hold approximately 20 per cent and 14 per cent of the current issued share capital of the group, respectively, to vote in favour of the rights issue. 

By selling its 50 per cent stake in its 11 European retail outlets to joint-venture partner APG, the group is hoping to generate €301m (£271m). 

The loan-to-value ratio rose to 51 per cent during the first six months of the year, from 45 per cent at the same time in 2019, with net debt standing at £3bn. 

"We've got to strengthen the balance sheet, values are falling and we've got to protect shareholders," said chief executive David Atkins. 

A deal to sell seven retail parks for £400m fell through in May after buyer Orion walked away from the transaction. The group is not currently in discussions with any other parties to sell the portfolio, Mr Atkins said. "It's more likely disposals will come through that on a single-asset basis rather than the bulk portfolio, which inevitable attracts more of a discount," he added. 

In July, the group announced that it had negotiated a waiver on the covenant attached to its £689m private placement notes, which is most sensitive to asset valuation falls. That unencumbered asset ratio stood at 1.54 at the end of June, against a new floor of 1.25. 

The group also intends to introduce a new leasing model, which will include more flexible leases, rebased rents at more affordable levels and indexation replacing the existing rent-review system. It will also include an omnichannel top-up element, which could include a turnover-based rent with an adjustment for the role of 'click and collect' in store, Mr Atkins said.