Herbert Smith Freehills has advised Wesfarmers and Bunnings on an innovative securitised lease transaction. The transaction combines the sale and lease-back of 15 Bunnings Warehouse properties with a structured debt capital raising of approximately A$304 million for Wesfarmers. The transaction is the first of its kind in Australia and was significantly over-subscribed.
Herbert Smith Freehills partners Justin O’Farrell, Patrick Lowden and Lachlan Roots led the transaction, which brought together teams from across the Firm’s corporate, debt capital markets, securitisation and real estate offerings. The Herbert Smith Freehills team worked closely on the transaction with the Wesfarmers Corporate Solicitors Office team led by Sheldon Renkema, Stephen Kubicki and Nicky Giovkos.
“The deal is a significant financing initiative for Wesfarmers and Bunnings,” O’Farrell said. “It’s very inventive, maximising value from the property portfolio while obtaining solid balance sheet and market outcomes. The people who came together for this one across Wesfarmers, Bunnings, Goldman Sachs, CIMB, Westpac and our own debt capital markets and securitisation outfits were just superb.”
“Wesfarmers showed its innovation in structuring the transaction,” continues Lowden, Head of Debt Capital Markets at Herbert Smith Freehills. “The success of such a novel, structured issue in the post-GFC environment is an extremely encouraging sign for the structured finance market in Australia. The pricing and excess demand for the product indicate a clear appetite for well-structured products backed by well-rated corporates in Australia.”
“I don’t think I’ve worked on a more complex but enjoyable deal, and it’s great to see a fresh approach to the securitisation market,” Roots, Head of Securitisation, comments. “Working with Wesfarmers and Bunnings on such a deal has been an absolute pleasure.”
The capital raising involved the sale to fixed income investors of around A$271 million of A- rated partially amortising 12 year floating rate senior bonds, together with around A$33 million of residual value notes, half of which were sold to high net worth investors. The transaction continues Wesfarmers’ strategy to release capital from its balance sheet.
The Herbert Smith Freehills team also included support from partners Julie Couch (Real Estate), Richard Giannone (Stamp Duty) Executive Counsel Vinh Huynh, Senior Associates Grant Williams, Anna Yeung, Daniel Lee, Matthew Farnsworth, Sam Brown and Lindsay Sheather, with solicitors Calvin Shaw, Evelyn Subagio and Rowan Kellam.
This transaction underlines the strength of Herbert Smith Freehills’ corporate, capital markets and structured finance offering across the board, and follows its record of having advised on some of the most complex and innovative transactions in the Australian debt capital market to date. In addition to having advised on almost all the hybrid capital markets issues by banks and corporates over the last 2 years, the HSF team advised on the first covered bond issues in Australia, Santos’s market-defining high equity content subordinated note issue in 2010 and a number of market-first securitisation transactions including the securitised property portfolio transactions by Amcor and David Jones.
Herbert Smith Freehills worked closely with Melbourne-based partners Nick Stocks and Lee Wolveridge of Lander & Rogers, on the real estate aspects of the deal. Lander & Rogers has had a long-term association with Bunnings, assisting it with its leasing and real estate needs.
Goldman Sachs Australia and CIMB Capital Markets (Australia) were Joint Arrangers, and together with Westpac Banking Corporation were the Joint Lead Managers and Bookrunners of the transaction, represented by King & Wood Mallesons.
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