I N S U R A N C E R E V I E W & A N A L Y S I S Trusted by the world’s leading lenders A publication of Summer issue 2013 sponsored by CRE Finance World Summer 2013 41 Outlook As the first high yield transaction with clear real estate finance features, the extent to which the Annington deal will be a precedent for future similar transactions is not clear at this stage. Going forward, it may be possible to further strengthen some of the typical real estate provisions. This, however, has to be weighed against the need of the issuer to retain sufficient flexibility to maximise the returns from the business. In addition, while some high yield bond issuers, like the Annington Group, will be able to point to covenants in outstanding CMBS or other financings to address (at least to some degree) the needs of investors, many others will not and will have to devise different solutions to these issues. Much will depend on the investors in future transactions and whether these are offered exclusively to traditional high yield bond investors or whether real estate debt investors continue to be attracted to these investment opportunities. It also remains to be seen whether high yield investors will see any advantages in adopting real estate debt techniques. What is clear, however, is that high yield bond issues will be an interesting and attractive source of funding to the debt-starved European real estate industry. This seems likely to be particularly the case with sophisticated owners in the hospitality, healthcare and retail real estate sectors as well as owners of secondary assets and owners of very large portfolios, all of whom face significant challenges in raising new financing in the traditional markets. 1 Paul Hastings (Europe) LLP advised the arrangers of all three of these transactions. 2 Elli Finance (UK) Plc and Elli Investments Limited. 3 Annington Finance No. 5 plc. 4 Paul Hastings (Europe) LLP advised investors in the transaction. Hybrid High Yield/CMBS Bonds Help Fill Europe’s Real Estate Funding Gap I N S U R A N C E C O N S U L T A N T S WITH OFFICES IN NEW YORK AND MIAMI Telephone: (212)336-0816 Lfields@harbor-insurance.com Harbor Group is the premier insurance consulting firm to investment banks, capital market lenders, and commercial banks. For over 20 years, from comprehensive insurance review to advisory services, our seasoned expertise provides prudent, time-sensitive counsel.
CRE Finance World, Summer 2013
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