St. Modwen Properties PLC (Incorporated with limited liability in England and Wales with registered number 00349201) 6.25 per cent. Sterling Bonds due 2019 Issue price: 100 per cent. The 6.25 per cent. Sterling Bonds due 2019 (the “Bonds”) of St. Modwen Properties PLC (the “Issuer” or “St. Modwen”) are proposed to be issued on a date, which is expected to be 7 November 2012, to be set out in an announcement which will be published by the Issuer by a Regulatory Information Service (expected to be the Regulatory News Service operated by the London Stock Exchange plc) on or about 31 October 2012 (the “Sizing Announcement”). The aggregate principal amount of the Bonds to be issued will be determined following a process of bookbuilding by Investec Bank plc and Numis Securities Limited as described under “Subscription and Sale”, and will be set out in the Sizing Announcement. The Bonds will rank pari passu without any preference among themselves and they will (subject to Condition 3(a) (Negative Pledge) of the terms and conditions of the Bonds) constitute unsecured and unsubordinated obligations of the Issuer. See “Terms and Conditions of the Bonds – Covenants”. Interest on the Bonds is payable in equal instalments in arrear on 7 May and 7 November in each year up to and including 7 November 2019. The Bonds mature on 7 November 2019 (the “Maturity Date”). The Bonds are also subject to redemption at the option of the holders of the Bonds as described in “Terms and Conditions of the Bonds – Redemption and Purchase – Redemption at the option of the Bondholders upon a Change of Control” and by the Issuer as described in “Terms and Conditions of the Bonds – Redemption and Purchase – Other redemption at the option of the Issuer” and “Terms and Conditions of the Bonds – Redemption and Purchase – Redemption at the option of the Bondholders upon a Change of Control”. Application will be made after the publication of the Sizing Announcement to the Financial Services Authority (the “FSA”) in its capacity as competent authority under the Financial Services and Markets Act 2000 (the “UK Listing Authority”) for the Bonds to be admitted to the Official List of the UK Listing Authority and to the London Stock Exchange plc (the “London Stock Exchange”) for the Bonds to be admitted to trading on the London Stock Exchange’s regulated market (the “Regulated Market”) and through the electronic order book for retail Bonds (the “ORB”) of the London Stock Exchange. The Regulated Market is a regulated market for the purposes of Directive 2004/39/EC of the European Parliament and of the Council on markets in financial instruments (“MiFID”). The denomination of the Bonds will be £100. The Bonds will initially be represented by a global Bond (the “Global Bond”), without interest coupons, which will be deposited with a common depository on behalf of Clearstream Banking, société anonyme (“Clearstream, Luxembourg”) and Euroclear Bank S.A./N.V. (“Euroclear”) on or about the Issue Date. The Global Bond will be exchangeable for definitive Bonds in bearer form in the denomination of £100 not less than 60 days following the request of the Issuer or the holder in the limited circumstances set out in it. See “Summary of Provisions Relating to the Bonds while in Global Form”. AN INVESTMENT IN THE BONDS INVOLVES CERTAIN RISKS. PROSPECTIVE INVESTORS SHOULD HAVE REGARD TO THE FACTORS DESCRIBED UNDER THE HEADING “RISK FACTORS”. Joint Lead Managers INVESTEC NUMIS SECURITIES The date of this Prospectus is 17 October 2012. PROSPECTUS
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St. Modwen Properties PLC(Incorporated with limited liability in England and Wales with registered number 00349201)
6.25 per cent. Sterling Bonds due 2019
Issue price: 100 per cent.
The 6.25 per cent. Sterling Bonds due 2019 (the “Bonds”) of St. Modwen Properties PLC (the “Issuer” or“St. Modwen”) are proposed to be issued on a date, which is expected to be 7 November 2012, to be setout in an announcement which will be published by the Issuer by a Regulatory Information Service(expected to be the Regulatory News Service operated by the London Stock Exchange plc) on or about31 October 2012 (the “Sizing Announcement”). The aggregate principal amount of the Bonds to be issuedwill be determined following a process of bookbuilding by Investec Bank plc and Numis Securities Limitedas described under “Subscription and Sale”, and will be set out in the Sizing Announcement.
The Bonds will rank pari passu without any preference among themselves and they will (subject toCondition 3(a) (Negative Pledge) of the terms and conditions of the Bonds) constitute unsecured andunsubordinated obligations of the Issuer. See “Terms and Conditions of the Bonds – Covenants”.
Interest on the Bonds is payable in equal instalments in arrear on 7 May and 7 November in each year upto and including 7 November 2019.
The Bonds mature on 7 November 2019 (the “Maturity Date”). The Bonds are also subject to redemptionat the option of the holders of the Bonds as described in “Terms and Conditions of the Bonds –Redemption and Purchase – Redemption at the option of the Bondholders upon a Change of Control”and by the Issuer as described in “Terms and Conditions of the Bonds – Redemption and Purchase –Other redemption at the option of the Issuer” and “Terms and Conditions of the Bonds – Redemption andPurchase – Redemption at the option of the Bondholders upon a Change of Control”.
Application will be made after the publication of the Sizing Announcement to the Financial ServicesAuthority (the “FSA”) in its capacity as competent authority under the Financial Services and MarketsAct 2000 (the “UK Listing Authority”) for the Bonds to be admitted to the Official List of the UK ListingAuthority and to the London Stock Exchange plc (the “London Stock Exchange”) for the Bonds to beadmitted to trading on the London Stock Exchange’s regulated market (the “Regulated Market”) andthrough the electronic order book for retail Bonds (the “ORB”) of the London Stock Exchange. TheRegulated Market is a regulated market for the purposes of Directive 2004/39/EC of the EuropeanParliament and of the Council on markets in financial instruments (“MiFID”).
The denomination of the Bonds will be £100. The Bonds will initially be represented by a global Bond (the“Global Bond”), without interest coupons, which will be deposited with a common depository on behalf ofClearstream Banking, société anonyme (“Clearstream, Luxembourg”) and Euroclear Bank S.A./N.V.(“Euroclear”) on or about the Issue Date. The Global Bond will be exchangeable for definitive Bonds inbearer form in the denomination of £100 not less than 60 days following the request of the Issuer or theholder in the limited circumstances set out in it. See “Summary of Provisions Relating to the Bonds whilein Global Form”.
AN INVESTMENT IN THE BONDS INVOLVES CERTAIN RISKS. PROSPECTIVE INVESTORSSHOULD HAVE REGARD TO THE FACTORS DESCRIBED UNDER THE HEADING “RISKFACTORS”.
Joint Lead Managers
INVESTEC NUMIS SECURITIES
The date of this Prospectus is 17 October 2012.
PROSPECTUS
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This Prospectus comprises a prospectus for the purposes of Article 5.4 of Directive 2003/71/EC, asamended, to the extent that such amendments have been implemented in the relevant Member State of theEuropean Economic Area (the “Prospectus Directive”) and for the purpose of giving information withregard to the Issuer, the Issuer and its subsidiaries and affiliates taken as a whole (the “Group”) and theBonds which, according to the particular nature of the Issuer and the Bonds, is necessary to enableinvestors to make an informed assessment of the assets and liabilities, financial position, profit and lossesand prospects of the Issuer.
The Issuer accepts responsibility for the information contained in this Prospectus. To the best of theknowledge of the Issuer (having taken all reasonable care to ensure that such is the case) the informationcontained in this Prospectus is in accordance with the facts and does not omit anything likely to affect theimport of such information. Where information has been sourced from a third party, this information hasbeen accurately reproduced and that as far as the Issuer is aware and is able to ascertain from informationpublished by that third party, no facts have been omitted which would render the reproduced informationinaccurate or misleading. The source of third party information is identified where used.
This Prospectus is to be read in conjunction with all documents which are deemed to be incorporatedherein by reference (see “Documents Incorporated by Reference”).
In the context of any offer of Bonds in the United Kingdom that is not within an exemption from therequirement to publish a prospectus under the Prospectus Directive (a “Public Offer”), the Issuer acceptsresponsibility, in the United Kingdom, for the content of this Prospectus in relation to any person (an“Investor”) in the United Kingdom to whom an offer of any Bonds is made by any financial intermediary(including each of the Joint Lead Managers) (in each case, an “Authorised Offeror”), where the offer ismade pursuant to the conditions set out in the following paragraph. However, neither the Issuer nor theJoint Lead Managers has any responsibility for any of the actions of any Authorised Offeror (except forthe Joint Lead Managers), including compliance by an Authorised Offeror with applicable conduct ofbusiness rules or other local regulatory requirements or other securities law requirements in relation tosuch offer.
The Issuer has granted consent to the use of this Prospectus in connection with a Public Offer of anyrelevant Bonds during the period commencing from, and including, 17 October 2012 until 12.00 noon(London time) on 31 October 2012 or such earlier time and date as may be agreed between the Issuer andthe Joint Lead Managers and announced via a Regulatory Information Service (the “Offer Period”) in theUnited Kingdom by: (i) the Joint Lead Managers; (ii) Barclays Stockbrokers Limited, Brewin DolphinLimited (trading as Stocktrade), Killik & Co LLP, NCL Investments Limited (trading as Smith andWilliamson Securities), Peel Hunt LLP, Redmayne-Bentley LLP, Talos Securities Limited (trading asSelftrade) and WH Ireland Limited (the “Specified Authorised Offerors”) (the addresses of the SpecifiedAuthorised Offerors are set out in “Terms and Conditions of the Offer”) and; (iii) any other AuthorisedOfferor, being a financial intermediary which satisfies the following conditions: (a) is authorised to makesuch offers under the MiFID; (b) acts in accordance with all applicable laws, rules, regulations andguidance of any applicable regulatory bodies (the “Rules”), including the Rules published by the FSA(including its guidance for distributors in “The Responsibilities of Providers and Distributors for the FairTreatment of Customers”) from time to time including, without limitation and in each case, Rules relatingto both the appropriateness or suitability of any investment in the Bonds by any person and disclosure toany potential investor; (c) complies with the restrictions set out under “Subscription and Sale” in thisProspectus which would apply as if it were a Joint Lead Manager; (d) ensures that any fee (and anycommissions or benefits of any kind) received or paid by that financial intermediary in relation to theoffer or sale of the Bonds does not violate the Rules and is fully and clearly disclosed to investors orpotential investors; (e) holds all licences, consents, approvals and permissions required in connection withsolicitation of interest in, or offers or sales of, the Bonds under the Rules, including authorisation underthe Financial Services and Markets Act 2000 (“FSMA”); (f) complies with applicable anti-moneylaundering, anti-bribery and “know your client” Rules, and does not permit any application for Bonds incircumstances where the financial intermediary has any suspicions as to the source of the applicationmonies; (g) retains investor identification records for at least the minimum period required underapplicable Rules, and shall, if so requested, make such records available to the Joint Lead Managers andthe Issuer or directly to the appropriate authorities with jurisdiction over the Issuer and/or any of theJoint Lead Managers in order to enable the Issuer and any of the Joint Lead Managers to comply withanti-money laundering, anti-bribery and “know your client” Rules applying to the Issuer and/or any ofthe Joint Lead Managers; and (h) does not, directly or indirectly, cause the Issuer or any of the Joint LeadManagers to breach any Rule or subject the Issuer or any of the Joint Lead Managers to any requirementto obtain or make any filing, authorisation or consent in any jurisdiction.
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Any new information with respect to Authorised Offerors unknown as of the date of this Prospectus willbe published on www.stmodwen.co.uk/bonds.
Any Authorised Offeror who wishes to use this Prospectus in connection with a Public Offer as set out aboveis required, for the duration of the Offer Period, to publish on its website that it is using this Prospectus forsuch Public Offer in accordance with the consent of the Issuer and the conditions attached thereto.
A Public Offer may be made, subject to the conditions set out above, during the Offer Period by any ofthe Issuer, the Joint Lead Managers or the other Authorised Offerors.
Other than as set out above, neither the Issuer nor any of the Joint Lead Managers has authorised themaking of any Public Offer by any person in any circumstances and such person is not permitted to usethis Prospectus in connection with its offer of any Bonds. Any such offers are not made on behalf of theIssuer or by any of the Joint Lead Managers or other Authorised Offerors and none of the Issuer, theJoint Lead Managers or other Authorised Offerors has any responsibility or liability for the actions of anyperson making such offers.
An Investor intending to acquire or acquiring any Bonds from an Authorised Offeror will do so, and offersand sales of the Bonds to an Investor by an Authorised Offeror will be made, in accordance with any termsand other arrangements in place between such Authorised Offeror and such Investor including as to price,allocations and settlement arrangements (the “Terms and Conditions of the Offer”). The Issuer will not be aparty to any such arrangements with Investors (other than the Joint Lead Managers) in connection with theoffer or sale of the Bonds and, accordingly, this Prospectus does not contain such information. The Terms andConditions of the Offer shall be provided by the relevant Authorised Offeror to the Investor at the relevanttime. None of the Issuer or the Joint Lead Managers or other Authorised Offerors has any responsibility orliability for such information.
None of the Joint Lead Managers or the Trustee (as defined below) has independently verified theinformation contained herein. Accordingly, no representation, warranty or undertaking, express orimplied, is made and no responsibility or liability is accepted by any of the Joint Lead Managers or theTrustee as to the accuracy or completeness of the information contained or incorporated in thisProspectus or any other information provided by the Issuer in connection with the offering of the Bonds.None of the Joint Lead Managers or the Trustee accepts liability in relation to the information containedor incorporated by reference in this Prospectus or any other information provided by the Issuer inconnection with the offering of the Bonds or their distribution.
No person is or has been authorised by the Issuer, any of the Joint Lead Managers or the Trustee to giveany information or to make any representation not contained in or not consistent with this Prospectus orany other information supplied in connection with the offering of the Bonds and, if given or made, suchinformation or representation must not be relied upon as having been authorised by the Issuer, any of theJoint Lead Managers or the Trustee.
Neither this Prospectus nor any other information supplied in connection with the offering of the Bonds:(a) is intended to provide the basis of any credit or other evaluation; or (b) should be considered as arecommendation by the Issuer, any of the Joint Lead Managers or the Trustee that any recipient of thisProspectus or any other information supplied in connection with the offering of the Bonds shouldpurchase any Bonds. Each Investor contemplating purchasing any Bonds should make its ownindependent investigation of the financial condition and affairs, and its own appraisal of thecreditworthiness, of the Issuer.
The issue of the Bonds is conditional upon various matters, including the Subscription Agreement beingsigned by the Issuer and the Joint Lead Managers and customary conditions precedent contained therein.See “Terms and Conditions of the Offer – Conditions to which the Offer is subject”.
Neither the delivery of this Prospectus nor the offering, sale or delivery of the Bonds shall, under anycircumstances, create any implication that the information contained herein concerning the Issuer iscorrect at any time subsequent to the date hereof or that any other information supplied in connectionwith the offering of the Bonds is correct as of any time subsequent to the date indicated in the documentcontaining the same. The Joint Lead Managers and the Trustee expressly do not undertake to review thefinancial condition or affairs of the Issuer during the life of the Bonds or to advise any Investor in theBonds of any information coming to their attention.
The Bonds have not been and will not be registered under the United States Securities Act of 1933, asamended (the “Securities Act”) and are subject to U.S. tax law requirements. Subject to certainexceptions, Bonds may not be offered, sold or delivered within the United States or to U.S. persons. For
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a description of certain restrictions on offers and sales of Bonds and on distribution of this Prospectus, see“Subscription and Sale”.
Neither this Prospectus nor any other information supplied in connection with the offering of the Bondsconstitutes an offer or invitation by or on behalf of the Issuer, the Joint Lead Managers or the Trustee toany person to subscribe for or to purchase any Bonds. In particular, this Prospectus does not constitutean offer to sell or the solicitation of an offer to buy the Bonds in any jurisdiction to any person to whomit is unlawful to make the offer or solicitation in such jurisdiction. The distribution of this Prospectus andthe offer or sale of Bonds may be restricted by law in certain jurisdictions. The Issuer, the Joint LeadManagers and the Trustee do not represent that this Prospectus may be lawfully distributed, or that theBonds may be lawfully offered, in compliance with any applicable registration or other requirements inany such jurisdiction, or pursuant to an exemption available thereunder, or assume any responsibility forfacilitating any such distribution or offering. In particular, no action has been taken (other than in theUnited Kingdom) by the Issuer or the Joint Lead Managers or by the Trustee anywhere which is intendedto permit a public offering of the Bonds or the distribution of this Prospectus in any jurisdiction whereaction for that purpose is required. Accordingly, no Bonds may be offered or sold, directly or indirectly,and neither this Prospectus nor any advertisement or other offering material may be distributed orpublished in any jurisdiction, except under circumstances that will result in compliance with anyapplicable laws and regulations. Persons into whose possession this Prospectus or any Bonds may comemust inform themselves about, and observe, any such restrictions on the distribution of this Prospectusand the offering and sale of Bonds. In particular, there are restrictions on the distribution of thisProspectus and the offer or sale of Bonds in the United States, the Member States of the EuropeanEconomic Area, Guernsey, Jersey and the Isle of Man; see “Subscription and Sale”.
Each potential investor in the Bonds must determine the suitability of that investment in light of its owncircumstances. In particular, each potential investor should:
(i) have sufficient knowledge and experience to make a meaningful evaluation of the Bonds, the meritsand risks of investing in the Bonds and the information contained or incorporated by reference inthis Prospectus or any applicable supplement;
(ii) have access to, and knowledge of, appropriate analytical tools to evaluate, in the context of itsparticular financial situation, an investment in the Bonds and the impact the Bonds will have on itsoverall investment portfolio;
(iii) have sufficient financial resources and liquidity to bear all of the risks of an investment in theBonds, including Bonds with principal or interest payable in one or more currencies, or where thecurrency for principal or interest payments is different from the potential investor’s currency;
(iv) understand thoroughly the terms of the Bonds and be familiar with the behaviour of any relevantindices and financial markets; and
(v) be able to evaluate (either alone or with the help of a financial adviser) possible scenarios foreconomic, interest rate and other factors that may affect its investment and its ability to bear theapplicable risks.
In certain circumstances, Investors may also hold interests in the Bonds through Euroclear UK & IrelandLimited (formerly known as CREST Co Limited) (“CREST”) through the issuance of dematerialiseddepository interests issued, held, settled and transferred through CREST (“CDIs”), representing interestsin the relevant Bonds underlying the CDIs (the “Underlying Bonds”). CDIs are independent securitiesconstituted under English law and transferred through CREST and will be issued by CREST DepositoryLimited (the “CREST Depository”) pursuant to the global deed poll dated 25 June 2001 (as subsequentlymodified, supplemented and/or restated) (“CREST Deed Poll”). Neither the Bonds nor any rightsattached thereto will be issued, settled, held or transferred within the CREST system other than throughthe issue, settlement holding or transfer of CDIs. CDI holders will not be entitled to deal directly in theBonds and, accordingly, all dealings in the Bonds will be effected through CREST in relation to theholding of CDIs. Investors should note that the CDIs are the result of the CREST settlement mechanics andare not the subject of this Prospectus.
All references in this Prospectus to “sterling” and “£” refer to the lawful currency of the United Kingdom.
Reference is made to the “Index of Terms” for the location of the definitions of certain terms definedherein.
CLEARING AND SETTLEMENT................................................................................................... 57
SUBSCRIPTION AND SALE........................................................................................................... 59
GENERAL INFORMATION ........................................................................................................... 61
INDEX OF TERMS........................................................................................................................... 65
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Section A – Introduction and warnings
A.1
A.2
This summary must be read as an introduction to this Prospectus. Any decision to invest in the securitiesshould be based on consideration of this Prospectus as a whole by the investor. Where a claim relating to theinformation contained in this Prospectus is brought before a court, the plaintiff investor might, under thenational legislation of the Member States, have to bear the costs of translating this Prospectus before the legalproceedings are initiated. Civil liability attaches only to those persons who have tabled the summary includingany translation thereof, but only if the summary is misleading, inaccurate or inconsistent when read togetherwith the other parts of this Prospectus or it does not provide, when read together with the other parts of thisProspectus, key information in order to aid investors when considering whether to invest in such securities.
The Issuer has granted consent for the use of this Prospectus in connection with any Public Offer of anyBonds during the period commencing from, and including, 17 October 2012 until 12.00 noon (London time)on 31 October 2012 or such earlier time and date as may be agreed between the Issuer and the Joint LeadManagers and announced via a Regulatory Information Service, in the United Kingdom by: (i) the JointLead Managers; (ii) the Specified Authorised Offerors; and (iii) any financial intermediary which: (a) isauthorised to make such offers under the MiFID; (b) acts in accordance with the Rules; (c) complies with theselling restrictions applicable to the Bonds; (d) ensures that any fee (and any commissions or benefits of anykind) received or paid by that financial intermediary in relation to the offer or sale of the Bonds does notviolate the Rules and is fully and clearly disclosed to investors or potential investors; (e) holds all licences,consents, approvals and permissions required in connection with solicitation of interest in, or offers or salesof, the Bonds under the Rules, including authorisation under the FSMA; (f) complies with applicableanti-money laundering, anti-bribery and “know your client” Rules, and does not permit any application forBonds in circumstances where the financial intermediary has any suspicions as to the source of theapplication monies; (g) retains investor identification records for at least the minimum period required underapplicable Rules, and shall, if so requested, make such records available to the Joint Lead Managers and theIssuer or directly to the appropriate authorities with jurisdiction over the Issuer and/or any of the Joint LeadManagers in order to enable the Issuer and any of the Joint Lead Managers to comply with anti-moneylaundering, anti-bribery and “know your client” Rules applying to the Issuer and/or any of the Joint LeadManagers; and (h) does not, directly or indirectly, cause the Issuer or any of the Joint Lead Managers tobreach any Rule or subject the Issuer or any of the Joint Lead Managers to any requirement to obtain ormake any filing, authorisation or consent in any jurisdiction.
Any new information unknown as of the date of this Prospectus with respect to the Specified AuthorisedOfferors will be published on www.stmodwen.co.uk/bonds.
Any Authorised Offeror who wishes to use this Prospectus in connection with a Public Offer is required, for theduration of the Offer Period, to publish on its website that it is using this Prospectus for such Public Offer inaccordance with the consent of the Issuer and the conditions attached thereto.
An Investor intending to acquire or acquiring any Bonds from an Authorised Offeror will do so, and offers andsales of the Bonds to an investor by an Authorised Offeror will be made, in accordance with any terms and otherarrangements in place between such Authorised Offeror and such Investor including as to price, allocations andsettlement arrangements. The Issuer will not be a party to any such arrangements with Investors (other than theJoint Lead Managers) in connection with the offer or sale of the Bonds and, accordingly, this Prospectus will notcontain such information. The Terms and Conditions of the Offer shall be provided by the relevant AuthorisedOfferor to the Investor at the relevant time. None of the Issuer or the Joint Lead Managers or other AuthorisedOfferors has any responsibility or liability for such information.
SUMMARY
Summaries are made up of disclosure requirements known as ‘Elements’. These elements are numbered inSections A – E (A.1 – E.7). This summary contains all the Elements required to be included in a summaryfor this type of securities and issuer. Because some Elements are not required to be addressed, there maybe gaps in the numbering sequence of the Elements. Even though an Element may be required to beinserted in the summary because of the type of securities and issuer, it is possible that no relevantinformation can be given regarding the Element. In this case a short description of the Element is includedin the summary with the mention of ‘not applicable’.
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Section B – Issuer
B.1
B.2
B.4b
B.5
B.9
B.10
B.12
The Issuer’s legal and commercial name is St. Modwen Properties PLC.Legal and commercialName.
The domicile and legal formof the issuer, the legislationunder which the issueroperates and its country ofincorporation.
The Issuer is a public limited company incorporated in England and Walesunder the Companies Act 1985 with registered number 00349201.
A description of any knowntrends affecting the issuerand the industries in whichit operates.
St. Modwen believes that the residential housing market has recently seen newhouse sales increasing in certain parts of the UK (in particular, the SouthEast), with sales levels remaining broadly stable in other parts of the UK.
St. Modwen also believes that the market for non-prime property remainschallenging, as it has been in recent years. This is providing St. Modwen withsome acquisition opportunities but, as a result of general sector sentiment,may also put pressure on book valuations for its income-producingproperties. However, notwithstanding difficult market conditions, theGroup’s income-producing properties continue to perform well and in the sixmonths ended 31 May 2012 generated income in excess of the Group’soverhead and interest costs.
If the issuer is part of agroup, a description of thegroup and the issuer’sposition within the group.
The Issuer is the parent company of the group of which it is a member. TheIssuer’s principal subsidiaries invest in, develop and operate the Group’sproperties.
Where a profit forecast orestimate is made, state thefigure.
Not applicable; the Issuer has not made any public profit forecast or profitestimate.
A description of the natureof any qualifications in theaudit report on the historicalfinancial information.
Not applicable; none of the audit reports on the Issuer’s audited consolidatedfinancial statements for the years ended 30 November 2010 and 2011 includedany qualifications.
Selected historical keyfinancial informationregarding the issuer,presented for each financialyear of the period coveredby the historical financialinformation, and anysubsequent interim financialperiod accompanied by
The following summary financial data as of, and for each of the years ended,30 November 2010 and 2011 and as of, and for the six month periods ended31 May 2011 and 2012 has been extracted, without any adjustment, from theIssuer’s consolidated financial statements in respect of those dates and periods.
There has been no significant change in the financial or trading position of theIssuer or the Group since 31 May 2012 and there has been no material adversechange in the prospects of the Issuer or the Group since 30 November 2011.
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comparative data from thesame period in the priorfinancial year except thatthe requirement forcomparative balance sheetinformation is satisfied bypresenting the year endbalance sheet information.
A statement that there hasbeen no material adversechange in the prospects ofthe issuer since the date ofits last published auditedfinancial statements or adescription of any materialadverse change.
A description of significantchanges in the financial ortrading position subsequentto the period covered by thehistorical financialinformation.
Group income statementFor the year ended For the six months 30 November ended 31 May
Other net income................................. 3.1 3.2 1.5 1.5Profits of joint ventures and associates (post tax)......................... 7.4 2.9 2.4 19.2
Administrative expenses...................... (16.8) (16.6) (8.4) (8.3)Profit before interest and tax............... 58.3 74.1 45.2 40.4Finance cost......................................... (24.0) (26.2) (12.0) (11.5)Finance income ................................... 3.2 2.5 4.2 1.5Profit before tax .................................. 37.5 50.4 37.4 30.4Taxation .............................................. 0.8 (4.9) (7.1) (1.7)Profit for the period ............................. 38.3 45.5 30.3 28.7Attributable to:....................................Equity attributable to owners of the company................................ 37.2 43.5 28.7 28.6
Basic earnings per share (pence) ......... 18.6 21.7 14.3 14.3Diluted earnings per share (pence) ..... 18.6 21.7 14.3 14.2
Group statement of comprehensive income
For the year ended For the six months 30 November ended 31 May
55555 55555
2010 2011 2011 201255 55 55 55
(£ million) (£ million, unaudited)
Profit for the period ......................... 38.3 45.5 30.3 28.7Pension fund:– Actuarial losses ............................. (0.1) (0.2) — (0.2)– Deferred tax.................................. — — — —Total comprehensive income for the period ................................. 38.2 45.3 30.3 28.5
Attributable to:Owners of the company.................... 37.1 43.3 28.7 28.4Non-controlling interests .................. 1.1 2.0 1.6 0.1Total comprehensive income for the period ................................. 38.2 45.3 30.3 28.5
Increase/(decrease) in cash and cash equivalents .............................. 6.5 (6.1) (5.0) 6.0
Cash and cash equivalents at start of period ................................. 4.8 11.3 11.3 5.2
Cash and cash equivalents at end of period .................................... 11.3 5.2 6.3 11.2
Cash .................................................... 11.3 5.2 11.3 11.8Bank overdrafts .................................. — — (5.0) (0.6)Cash and cash equivalents at end of period .................................... 11.3 5.2 6.3 11.2
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B.13
B.14
B.15
B.16
B.17
Not applicable; there have been no recent events particular to the Issuerwhich are to a material extent relevant to the evaluation of the Issuer’ssolvency.
A description of any recentevents particular to theissuer which are to amaterial extent relevant tothe evaluation of the issuer’ssolvency.
If the issuer is part of agroup, a description of thegroup and the issuer’sposition within the group. Ifthe issuer is dependent uponother entities within thegroup, this must be clearlystated.
The Issuer is the parent company of the group of which it is a member. TheIssuer’s principal subsidiaries invest in, develop and operate the Group’sproperties. The Issuer is dependent upon its principal subsidiaries for itsincome (principally from the repayment of intra-group debt provided bySt. Modwen to such subsidiaries).
A description of the issuer’sprincipal activities.
St. Modwen is the UK’s leading regeneration specialist. The Group operatesacross many sectors of the property market, from its Birmingham based headoffice, a network of seven regional offices and through joint venture orcollaboration arrangements with industry leading partners. The Group’sproperty portfolio is located solely in the UK and is valued at £1.1 billion andis spread across income-producing assets (51 per cent. by value), residentialland (37 per cent.) and commercial land (12 per cent.). With its activelymanaged landbank of development opportunities comprising more than 5,800developable acres, the Group is focused wholly upon regeneration and thelong term development of commercial property and residential land and has a25 year track record of adding value by managing schemes through theplanning process, remediating contaminated land and pursuing an activeprogramme of asset management and development.
To the extent known to theissuer, state whether theissuer is directly or indirectlyowned or controlled and bywhom and describe thenature of such control.
To the extent known to St. Modwen, St. Modwen is not directly or indirectlyowned or controlled.
Credit ratings assigned toan issuer or its debtsecurities at the request orwith the co-operation of theissuer in the rating process.
Not applicable; neither the Issuer nor any of its debt securities has beenassigned any credit ratings.
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Section C – Securities
C.1
C.2
C.5
C.8
The 6.25 per cent. Bonds due 2019 will be issued in bearer form in thedenomination of £100.
The ISIN for the Bonds is XS0841076465 and the Common Code is084107646.
A description of the typeand the class of thesecurities being offeredand/or admitted to trading,including any securityidentification number.
Currency of the securitiesissue.
Sterling (£).
A description of anyrestrictions on the freetransferability of thesecurities.
Not applicable; there are no restrictions on the free transferability of theBonds.
A description of the rightsattached to the securitiesincluding:
l ranking
l limitations to thoserights
Status of the Bonds
The Bonds constitute direct, unconditional and subject to the negative pledge,unsecured obligations of the Issuer and will rank pari passu, without anypreference among themselves, with all other outstanding unsecured andunsubordinated obligations of the Issuer, present and future, but, in the eventof insolvency, only to the extent permitted by applicable laws relating tocreditors’ rights.
Negative pledge
The Bonds contain a negative pledge provision pursuant to which neither theIssuer nor any of its subsidiaries may create or have outstanding any securityinterest over its present or future undertaking, assets or revenues to secure anyguarantee or indemnity in respect of certain types of indebtedness withoutsecuring the Bonds equally and rateably, subject to certain exceptions.
Financial covenants
So long as any Bond remains outstanding, the Issuer shall ensure that: (i) as atany LTV Reporting Date, See-through Net Debt does not exceed 75 per cent.of See-through Property Portfolio; and (ii) as at and for the 12 month periodending on each Interest Coverage Ratio Reporting Date, the ratio of NetSee-through Operating Income to Net See-through Financing Costs will be atleast 1.5.
Events of default
Events of default under the Bonds include non-payment of interest for14 days, breach of other obligations under the Bonds or the Trust Deed (whichbreach is not remedied within 30 days), cross-default relating to indebtednessfor borrowed money of the Issuer or any of its Principal Subsidiaries subject toan aggregate threshold of £10,000,000, the enforcement of any security createdor assumed by the Issuer or its Principal Subsidiaries and certain events relatedto insolvency or winding up of the Issuer or any of its Principal Subsidiaries.In addition, Trustee certification that certain events would be materiallyprejudicial to the interests of the Bondholders is required before certain eventswill be deemed to constitute Events of Default.
Optional early redemption by Issuer
The Bonds may be redeemed early, at any time, at the option of the Issuer, at100 per cent. of their face value or, if higher, an amount calculated byreference to the prevailing yield of the 3.75 per cent. United KingdomTreasury Stock due 2019 plus a margin of 0.5 per cent., together with anyaccrued interest.
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C.9
Optional early redemption by Issuer for tax reasons
The Bonds may be redeemed at the option of the Issuer in whole, but not inpart, at any time at par plus accrued interest in the event of certain taxchanges caused by any change in, amendment to, or application or officialinterpretation of the laws or regulations of the United Kingdom on or after7 November 2012.
Optional early redemption by the Bondholders
The Bonds may be redeemed at the option of the Bondholders at par plusaccrued interest if a Change of Control Event occurs. If 80 per cent. or moreof the Bonds originally issued have been redeemed in this way by thebondholders, the Issuer may, at its option, redeem all the remaining Bondsat face value plus accrued interest.
Meetings of Bondholders:
The Conditions contain provisions for calling meetings of Bondholders toconsider matters affecting their interests generally. These provisions permitdefined majorities to bind all Bondholders including Bondholders who didnot vote on the relevant resolution and Bondholders who voted in a mannercontrary to the majority.
Modification, waiver and substitution:
The Trustee may, without the consent of Bondholders or Couponholders,agree to: (a) any modification of any of the provisions of the Trust Deed thatis of a formal, minor or technical nature or is made to correct a manifesterror; or (b) any other modifications and any waiver or authorisation of anybreach or proposed breach, of any of the provisions of the Trust Deed thatis in the opinion of the Trustee not materially prejudicial to the interests ofthe Bondholders; or (c) the substitution of another company as principaldebtor under the Bonds in place of the Issuer or any company substituted forthe Issuer, in the circumstances described in Condition 11(c).
A description of the rightsattached to the securitiesincluding:
l the nominal interestrate
l the date from whichinterest becomespayable and the duedates for interest
l where the rate is notfixed, description of theunderlying on which itis based
l maturity date andarrangements for theamortisation of theloan, including therepayment procedures
l an indication of yield
l name of representativeof debt security holders
Please see Element C.8.
Interest rate
The Bonds bear interest from and including the Issue Date at the rate of6.25 per cent. per annum, payable semi-annually in arrear in equalinstalments of £3.125 per £100 in principal amount of Bonds on 7 May and7 November in each year commencing on 7 May 2013. The final payment ofinterest will be made on the Maturity Date.
Maturity date
Unless previously purchased and cancelled in accordance with theConditions, the Bonds mature on 7 November 2019.
Indication of yield
On the basis of the issue price of the Bonds of 100 per cent. of their principalamount, the yield of the Bonds is expected to be 6.25 per cent. on an annualbasis. It is not an indication of future yield.
Trustee
U.S. Bank Trustees Limited
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C.10
C.11
Please see Element C.9.
Not applicable; the Bonds bear interest at a fixed rate and there is not aderivative component in the interest payments made in respect of the Bonds.
If the security has aderivative component in theinterest payment, provide aclear and comprehensiveexplanation to help investorsunderstand how the value oftheir investment is affectedby the value of theunderlying instrument(s),especially under thecircumstances when therisks are most evident.
An indication as to whetherthe securities offered are orwill be the object of anapplication for admission totrading, with a view to theirdistribution in a regulatedmarket or other equivalentmarkets with indication ofthe markets in question.
Application will be made after the publication of the Sizing Announcement:(i) to the UK Listing Authority for the Bonds to be admitted to the OfficialList; and (ii) to the London Stock Exchange for the Bonds to be admitted totrading on the Regulated Market and through the ORB of the London StockExchange. Admission of the Bonds to trading is expected to occur on8 November 2012.
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Section D – Risks
D.2 l The financial performance of the Group’s business could be adverselyaffected by the continued worsening of general economic conditions inthe UK, Europe, globally or in certain individual markets. Factors suchas interest rates, the availability and cost of credit, declining investmentyields, overall customer demand and the liquidity of financial marketscould have an adverse effect on the Group’s business, results ofoperations, financial condition and/or prospects.
l If the Group were to face a liquidity crisis in the future, whether formacro-economic reasons or for reasons specific to the Group, it couldsignificantly increase the Group’s cost of funding or lead to seriousdifficulties for the Group in refinancing its debt.
l Failure by the Group to comply with any of its financial covenants in itsbanking facilities could result in an acceleration of the Group’sobligation to repay those borrowings. If such failure occurred, thelending banks would also be able to enforce their security and takecontrol of some of the Group’s assets and make a demand on anyguarantees given in respect of the facilities. The Group’s bankingfacilities also include cross-default provisions.
l Overexposure to any one scheme, tenant or sector may adversely impactthe Group’s business, results of operations, financial condition and/orprospects if that scheme terminates or ceases to be profitable, if thattenant fails or experiences financial difficulties, or if that sector performsbadly.
l In the event that: (i) the market for residential land and/or residentialproperty is not functioning properly; (ii) there is a significant decline inmarket values; and/or (iii) there is a decline in the availability and/or anincrease in the cost of credit for residential buyers, this could have anadverse impact on the Group’s business, results of operations, financialcondition and/or prospects.
l Current or future planning applications may not result in full planningpermission and planning permissions, if granted, may be on undulyonerous terms.
l A significant decline in the value of the Group’s investment propertyassets may limit or reduce the level of return on the Group’s investmentin the property.
l In the event that a contractor or supplier fails to deliver and/or ceases tobe financially viable, the timetable of the relevant development orscheme may be delayed, the Group may need to provide additionalresources to the development (financial or otherwise) and/or may incurfinancial liabilities.
● The Group’s debt facilities impose certain restrictions on the Group.These restrictions may affect, limit or prohibit the Group’s ability tocreate or permit to subsist any charges, liens or other encumbrances inthe nature of a security interest; incur any additional indebtedness byway of borrowing, leasing commitments, factoring of debts or grantingof guarantees; make any material changes in the nature of its business aspresently conducted; sell, transfer, lease or otherwise dispose of all or asubstantial part of its assets; amend, vary or waive the terms of certainacquisition documents or give any consent or exercise any discretionthereunder; acquire any businesses; or make any co-investments orinvestments over the longer term.
Key information on the keyrisks that are specific to theissuer.
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D3 l The Issuer is, in part, dependent upon receipt of funds from itssubsidiaries in order to fulfil its obligations under the Bonds. The Bondsare (subject to a negative pledge) unsecured obligations of the Issuer.The obligations of the Issuer under the Bonds are therefore structurallysubordinated to any liabilities of the Issuer’s subsidiaries.
l Defined majorities may be permitted to bind all the Bondholders withrespect to modification and waivers of the terms and conditions of theBonds, including with regard to substitution of the Issuer in certaincircumstances.
l A market for the Bonds may not develop, or may not be very liquid andsuch illiquidity may have a severely adverse effect on the market valueof the Bonds.
l The realisation from a sale of the Bonds at any time prior to theirmaturity may be below the investment price.
l The Bonds bear interest at a fixed rate and the Issuer will pay principaland interest on the Bonds in pounds sterling, which potentially exposescertain investors to interest rate and inflation risk and exchange rate riskrespectively.
Key information on the keyrisks that are specific to thesecurities.
Section E – Offer
E.2b
E.3
E.4
E.7
The offer of the Bonds is being made in order to raise funds for generalcorporate purposes and to diversify the funding base of St. Modwen. The netproceeds of the issue of the Bonds, to be determined following completion ofthe Offer Period and set forth in the Sizing Announcement, will be used forthe general corporate purposes of the Group including to reduce drawingsunder St. Modwen’s existing revolving credit facilities.
Reasons for the offer anduse of proceeds whendifferent from making profitand/or hedging certain risks.
A description of the termsand conditions of the offer.
The offer of the Bonds (the “Offer”) is expected to open on 17 October 2012and close at 12.00 noon (London time) on 31 October 2012 or such earliertime and date as may be agreed between the Issuer and the Joint LeadManagers and announced via a Regulatory Information Service.
Investors will be notified by the relevant Joint Lead Manager or otherAuthorised Offeror of their allocations of Bonds and the settlementarrangements in respect thereof. Investors may not be allocated all of theBonds for which they apply.
The Bonds will be issued at the issue price (being 100 per cent. of theprincipal amount of the Bonds) and the aggregate principal amount of theBonds to be issued will be specified in the Sizing Announcement publishedby the Issuer via Regulatory Information Service.
The issue of the Bonds is subject to certain conditions precedent customaryfor transactions of this type (including the issue of the Bonds and thedelivery of legal opinions and auditors comfort letters satisfactory to theJoint Lead Managers) to be set out in a subscription agreement between theIssuer and the Joint Lead Managers.
The minimum subscription per Investor is for a principal amount of £2,000of the Bonds.
A description of any interestthat is material to theissue/offer includingconflicting interests.
So far as the Issuer is aware, no person involved in the offer of the Bonds hasan interest material to the offer. There are no conflicts of interest which arematerial to the offer of the Bonds.
Estimated expenses chargedto the investor by the issueror the offeror.
The Issuer will not charge any expenses to any Investor.
Expenses may be charged by an Authorised Offeror; these are beyond thecontrol of the Issuer and are not set by the Issuer.
The expenses to be charged by Authorised Offerors not known to the Issuer asof the date of this Prospectus may vary depending on the size of the amountsubscribed for and the Investor’s arrangements with the Authorised Offeror.The expenses to be charged by those Authorised Offerors not known to theIssuer as of the date of this Prospectus are unknown.
The Issuer estimates that, in connection with the sale of Bonds to an Investor,the expenses charged by the Joint Lead Managers and the Authorised Offerorsknown to it as of the date of this Prospectus will be up to 1.75 per cent. of theaggregate principal amount of the Bonds sold to such Investor.
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RISK FACTORS
Potential investors in the Bonds should carefully consider the risks described below and all otherinformation contained in this Prospectus and reach their own view before making an investment decision.The Issuer believes that the factors described below represent the principal risks and uncertainties whichmay affect its ability to fulfil its obligations under the Bonds, but the Group may face other risks that maynot be considered significant risks by the Issuer based upon information available to it at the date of thisProspectus or that it may not be able to anticipate. Factors which the Issuer believes may be material forthe purpose of assessing the market risks associated with the Bonds are also described below. If any of thefollowing risks, as well as other risks and uncertainties that are not yet identified or that the Issuer thinksare immaterial at the date of this Prospectus, actually occur, then these could have a material adverseeffect on the Issuer’s ability to fulfil its obligations under the Bonds.
Risks relating to the Issuer and its business
Economic and market risk
Property markets tend to be cyclical and related to the condition of the economy as a whole. The Grouphas experienced, and may experience in the future, the negative impact of periods of economic slowdownor recession and corresponding declines in the demand for property in the markets in which it operates.The financial performance of the Group’s business could be adversely affected by the continued worseningof general economic conditions in the UK, Europe, globally or in certain individual markets. Factors suchas interest rates, the availability and cost of credit, declining investment yields, overall customer demandand the liquidity of financial markets could have an adverse effect on the Group’s business, results ofoperations, financial condition and/or prospects.
Further, as all of the Group’s properties are located in the UK, if there is a downturn in the UK’seconomy as a whole or if there is a decline in the residential and commercial property market in the UKwhich is more pronounced or sustained than in other geographic markets, the adverse impact on theGroup’s business could be greater than on the business of competitors with a smaller proportionalpresence in the UK.
Availability of funding
The Group’s existing debt facilities mature on dates ranging from November 2014 to June 2019. TheGroup’s ability to raise funds to roll-over or refinance its existing debt facilities on similar terms to theGroup’s existing debt facilities, or at all, will depend on a number of factors, including general economic,political, debt and equity capital market conditions, funding availability and, importantly, the appetite ofthe financial institutions to lend to the property sector. If the Group were to face a liquidity crisis in thefuture, whether for macro-economic reasons or for reasons specific to the Group, it could significantlyincrease the Group’s cost of funding or lead to serious difficulties for the Group in refinancing its debt.The Group could therefore be forced to sell its assets in such circumstances and such sales may not deliverthe level of proceeds that may otherwise be expected. This could have an adverse effect on the Group’sbusiness, results of operations, financial condition and/or prospects.
Further, failure by the Group to comply with any of its financial covenants in its banking facilities couldresult in an acceleration of the Group’s obligation to repay those borrowings. If such failure occurred, thelending banks would also be able to enforce their security and take control of some of the Group’s assetsand make a demand on any guarantees given in respect of the facilities. The occurrence of these eventscould have an adverse effect on the Group’s business, results of operations, financial condition and/orprospects.
Lack of demand for existing space from new or existing occupiers
The Group seeks to ensure that the income-producing properties in its portfolio produce income prior todevelopment. As such, certain of these properties may have a short lease profile in order to facilitatedevelopment opportunities. Accordingly whilst, as of the date of this Prospectus, St. Modwen believes thatthe Group has a diverse tenant roll on its income-producing properties, this roll may become less diversein the future as leases are renewed. Further, the difficult economic conditions in the UK mean that keytenants may experience financial difficulties. Any overexposure to any one tenant or sector may adverselyimpact the Group’s business, results of operations, financial condition and/or prospects if that tenant failsor experiences financial difficulties or if that sector performs badly. The rental income received by the
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Group from its properties and the Group’s share of rental income from its joint ventures may be adverselyaffected if the Group is overexposed to one tenant which fails or experiences financial difficulties.
As the Group’s projects are developed, the Group seeks to maximise occupancy rates for the completedprojects. The level of demand from occupiers for premises varies depending on a number of factors,including the availability and cost of land, materials or labour, general economic conditions, interest ratesand the cost of credit. Reduced occupancy rates could lead to a decline in the value of the Group’sinvestment property assets and reduce the Group’s rental income. Such a decline in net rental incomecould result in a consequential reduction in the value of the Group’s investment properties. The continuingand long term lack of demand from occupiers for premises could have an adverse impact on the Group’sbusiness, results of operations, financial condition and/or prospects.
Lack of demand for land and new properties
The sale of remediated brownfield land to housebuilders has been an important source of revenue for theGroup in recent years and the winning of residential planning consents on, for example, formeremployment land has been an important source of valuation uplifts for the Group. Further, since 2011 thesale of residential properties has been a growing source of revenue for the Group.
In the event that: (i) the market for residential land and/or residential property is not functioning properly;(ii) there is a decline in market values; and/or (iii) there is a decline in the availability and/or an increase inthe cost of credit for residential buyers, this could have an adverse impact on the Group’s business, resultsof operations, financial condition and/or prospects.
Planning risk
The Group’s continued progress with its projects for future delivery is dependent on the continued successof its applications for planning permission. Current or future planning applications may not result in fullplanning permission and planning permissions, if granted, may be on unduly onerous terms. Failure toobtain such permissions may reduce the speed at which the Group can implement its strategy, which mayhave an adverse impact on the Group’s business, results of operations, financial condition and/orprospects.
Further, the Group’s development operations are contingent upon an effectively functioning planningsystem. Changes in law or policy affecting planning, infrastructure or environmental (including wastedisposal) issues could adversely affect the timing or costs associated with development opportunities. Inaddition, new developments can also be subject to financial and other obligations for public improvementswhich can be substantial. Laws and regulations relating to the protection of the environment andsustainable building can also cause delays and increased costs. There is a risk that if national or localplanning policy changes and becomes more restrictive, there may be an impact upon the developmentopportunities for the Group’s existing and future landbank or upon the Group’s ability to obtain planningpermissions in the timescales required. Laws and regulations may change in ways that may have anadverse effect on the Group’s business, results of operations, financial condition and/or prospects.
Environmental / remediation risks of property ownership
The Group may be liable for the costs of investigation, ongoing monitoring or remediation of hazardousor toxic substances located on or in its properties. These costs may be substantial and long-term. Thepresence of such substances, or the failure to remediate such substances properly, may also affect theGroup’s ability to sell or lease the property or otherwise to borrow using the property as security. Lawsand regulations may also impose liability for the release of certain materials into the air, ground or waterfrom a property, including asbestos, and such release can form the basis of liability to third parties forpersonal injury or other damages. Whilst the Group seeks to minimise or pass on any such environmentalrisks, it is not possible to eliminate such risks completely. If the Group is found to be in violation of anysuch environmental laws or regulations, it could face reputational damage, regulatory compliancepenalties, reduced rental income and asset valuations which could have an adverse effect on the Group’sbusiness, results of operations, financial condition and/or prospects.
Arrangements with business partners
The Group has various arrangements in place with its business partners, such as its joint arrangement withPersimmon Homes plc to jointly develop over 2,000 residential units on eight sites. Under sucharrangements, the Group is often required to share control and specified major decisions relating to such
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arrangements may require the approval of the Group’s business partners. There are circumstances wherethe conduct or financial standing of a business partner could cause financial harm or reputational damageto the Group. For example, the Group’s business partners may have economic or business interests thatare inconsistent with the Group’s objectives and/or those business partners may fail, requiring the Groupto provide additional resources for a scheme. Further, under such arrangements, the Group may not beable to take action without its business partners and there is a risk that there could be disputes between theparties as to the terms of these arrangements. Accordingly, the use of such arrangements could prevent theGroup from achieving its objectives and could limit its business opportunities and this, in turn, couldresult in an adverse effect on the Group’s business, results of operations, financial condition and/orprospects.
Failure, or a perceived failure, in the Group’s business practices and ethics
As a regeneration specialist, the Group has the potential to make a significant impact upon theenvironment and the communities in which it works. Any failure or perceived failure by the Group or anyof its employees and contractors to act ethically (for example, by engaging in disreputable businesspractices) may cause reputational damage to the Group. The Group has a system of ethics, policies andprinciples in place which have the aim of ensuring that such practices are not engaged in by any of theGroup’s employees and contractors.
Customer dissatisfaction and other factors which may affect the Group’s reputation
Failure to deliver on contractual obligations, live up to expectations or to meet development budgets couldadversely affect the Group’s reputation (which is key to attracting new business partners and employees)and/or expose it to financial liability. This could result in an adverse effect on the Group’s business, resultof operations, financial condition and/or prospects.
Property valuation movements and liquidity
Properties, including those in which the Group has invested, or may invest in the future, can be relativelyilliquid investments. This lack of liquidity may affect the Group’s ability to realise its valuation gains, varyits portfolio or dispose of or liquidate part of its portfolio in a timely fashion and at satisfactory prices inresponse to changes in economic, real estate market or other conditions. A decline in the value of theGroup’s investment property assets may limit or reduce the level of return on the Group’s investment inthe property, which in turn could have an adverse effect on the Group’s business, results of operations,financial condition and/or prospects.
The valuation of property is subject to uncertainty and cash generated on disposal may be different fromthe value of asset previously carried on the Group’s balance sheet. Valuations of properties, when made,may not reflect the actual sale prices even where those sales occur shortly after the valuation date. Thismay mean that the value ascribed by St. Modwen and the Group to the properties held by it may notreflect the value realised on sale, and that the returns generated by the Group on disposals of propertiesmay be less than anticipated. In addition, the value of the Group’s property portfolio may fluctuate as aresult of factors such as changes in regulatory requirements and applicable laws (including taxation andplanning), political conditions, the condition of financial markets, interest and inflation fluctuations. Eachof these factors may have an adverse effect on the Group’s business, result of operations, financialcondition and/or prospects.
Defects in developments or schemes
Developments or schemes may not, when completed, be free from defects. In order to seek to minimise thelikelihood of defects, the Group’s dedicated construction team uses, and closely monitors, high-qualitytrusted contractors and professionals, with whom contractual liability is clearly defined, and whosefinancial viability is rigorously assessed. Notwithstanding these safeguards, the implications of schemedefects (particularly if combined with contractor failure) could have an adverse financial and reputationaleffect on the Group which in turn could have an adverse effect of the Group’s business, results ofoperations, financial condition and/or prospects.
Contractors or supplier failure
The Group is dependent on contractors and suppliers for the construction of its developments andschemes. In the event that a contractor or supplier fails to deliver and/or ceases to be financially viable, thetimetable of the relevant development or scheme may be delayed, the Group may need to provide
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additional resources to the development (financial or otherwise) and/or may incur financial liabilities.Failure of a contractor or a supplier could therefore have an adverse effect on the Group’s business, resultsof operations, financial condition and/or prospects.
Changing interest rates and counterparty credit risk
Changes in interest rates could adversely affect the Group’s debt service costs. An increase in rates wouldincrease debt service costs (on the floating element of the Group’s debt) and would adversely affect theGroup’s cash flow. Conversely, whilst a reduction in interest rates would have a positive cash flow effect(due to a reduction in interest payable on the floating element of the Group’s debt), it would reduce theGroup’s net asset value (to the extent the reduction in interest rates is reflected in long-term yield curves)as well as the market value of the Group’s hedging contracts. Accordingly, changes in interest rates couldtherefore have an adverse effect on the Group’s business, results of operations, financial condition and/orprospects.
The Group’s hedging arrangements seek to limit its exposure to interest rate risk. However, these hedgingarrangements may not limit the Group’s interest rate risk effectively. Use of interest rate hedgingarrangements to manage risk associated with interest rate volatility may expose the Group to additionalrisks, including the risk that a counterparty to a hedging arrangement may fail to honour its obligations.This means the Group is potentially exposed to a risk of loss being sustained by the Group as result ofpayment or other default by the counterparty with whom the Group has deposited cash or entered intohedging arrangements. The extent of the Group’s loss could be the full amount of the deposit or the costof replacing those hedging arrangements. Any such payment or other default may have an adverse effecton the Group’s business, results of operations, financial condition and/or prospects.
Increase in operating costs
The Group’s operating and other expenses could increase without a corresponding increase in turnover, orreimbursement of operating and other costs. Factors which could increase these costs include: increases inthe rate of inflation; increases in staff expenses and energy costs; increases in property taxes and otherstatutory charges; changes in laws, regulations or government policies which increase the costs ofcompliance; increases in insurance premiums; increases in the costs of maintaining properties (includingvoid property costs); defects affecting the properties which need to be rectified; and failure ofsub-contractors leading to unforeseen costs. Such cost increases could have an adverse effect on theGroup’s business, results of operations, financial condition and/or prospects.
Failure to retain and develop skilled management and personnel
The Group is dependent on members of its senior management team and skilled personnel and believesthat its future financial success and ability to meet its financial objectives will depend, in part, on its abilityto retain highly skilled management and personnel and maintain their skills. The Group is also dependenton the implementation of adequate succession planning procedures in respect of key roles to ensurecontinuity. If the Group does not succeed in retaining skilled personnel or fails to maintain the skills of itspersonnel, it may not be able to grow its business as anticipated or meet its financial objectives which mayhave an adverse effect on the Group’s business, results of operations, financial condition and/or prospects.Further, the departure from the Group of any of the Executive Directors or certain senior employeescould, in the short term, have an adverse effect on the Group’s business, results of operations, financialcondition and/or prospects. The Issuer’s Board of Directors (the “Board”) cannot give any assurances thatthey, or any of the members of the senior management, will remain with the Group.
Restrictions in the Group’s debt facilities
The Group has in place revolving credit facilities and loan facilities with third party lenders, which togethertotal £477 million of debt facilities (of which, as of 31 May 2012, had remaining undrawn headroom of£107 million). Details of the Group’s key debt facilities are set out in “General Information – MaterialContracts”. The Group’s debt facilities impose certain restrictions on the Group. These restrictions mayaffect, limit or prohibit the Group’s ability to create or permit to subsist any charges, liens or otherencumbrances in the nature of a security interest; incur any additional indebtedness by way of borrowing,leasing commitments, factoring of debts or granting of guarantees; make any material changes in the natureof its business as presently conducted; sell, transfer, lease or otherwise dispose of all or a substantial part ofits assets; amend, vary or waive the terms of certain acquisition documents or give any consent or exerciseany discretion thereunder; acquire any businesses; or make any co-investments or investments over the
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longer term. If the Group were to seek to vary or waive any of these restrictions and the relevant lenders didnot agree to such variation or amendment, the restrictions may delay the implementation of certain of theGroup’s development projects and may, over the longer term, limit the Group’s ability to plan for or reactto market conditions, meet capital needs, or otherwise restrict the Group’s activities or business plans andadversely affect the Group’s ability to finance acquisitions, investments and development projects.
Each of the Group’s debt facilities include cross-default provisions. If an event of default were to subsistunder one or more of the debt facilities, that event of default may, in accordance with the cross-defaultprovisions, constitute an event of default under the Group’s other debt facilities. Upon an event of default,whether due to a cross-default or otherwise, the relevant lenders would have the right, subject to the termsof the relevant facility agreements to, amongst other things, enforce security granted over the Group’sassets, declare the Group’s outstanding debts under the relevant facilities to be due and payable and/orcancel their respective commitments under the facilities. If one or more lenders were to take suchenforcement actions, this could have an adverse effect on the Group’s reputation, business, results ofoperations, financial condition and/or prospects.
Terrorism and accidents
The value of the Group’s properties may be adversely affected by actual or threatened acts of terrorism. Aterrorist attack in the UK may have an adverse impact on the willingness of tenants to let new space orrenew existing leases or on the ability of the Group to dispose of assets and on the values achieved on anyproperty disposals. Additionally, there is a risk of accidents involving the public, employers or contractorsat premises owned by the Group. Should an act of terrorism occur or be threatened, the resulting publicityand costs could have an adverse effect on the Group’s reputation, business, results of operations, financialcondition and/or prospects.
Further, there is a risk of accidents involving the public at premises owned by the Group. The Groupplaces great importance on health and safety and it has approved policies and procedures applicable to allits premises. In addition, the Group has public liability insurance in place which the Issuer considersprovides an adequate level of protection against third party claims. However, should an accident attractpublicity or be of a size and/or nature that is not adequately covered by insurance, the resulting publicityand costs could have a material adverse effect on the Group’s reputation, business, results of operations,financial condition and/or prospects. In such instance, the Group’s ability to put in place public liabilityinsurance cover in the future may also be adversely affected.
Business continuity and internal controls
The Group’s ability to conduct its business, including maintaining financial controls, is based in part onthe efficient and uninterrupted operation of its computer systems, including its information managementsystems. If any of the Group’s financial, personnel, email or other information technology systems orother systems or processes were to be disabled or did not operate properly by reason of events beyond theGroup’s control (for example, computer viruses, problems with the internet or sabotage), the Group couldsuffer disruption to its business, liability to its stakeholders, loss of data, regulatory intervention orreputational damage. This could cause an adverse effect on the Group’s business, results of operations,financial condition and/or prospects. Further, any failure in the Group’s internal controls could result inan adverse effect on the Group’s business, results of operations, financial condition and/or prospects.Notwithstanding anything in this risk factor, this risk factor should not be taken as implying that eitherthe Issuer or the Group will be unable to comply with its obligations as a company with securitiesadmitted to the Official List or as a firm regulated by the Financial Services Authority.
Changes to legislation, including taxation legislation
Government authorities are actively involved in the application and enforcement of laws and regulationsrelating to taxation, environmental protections, safety and other matters, (as well as those which relate toland use, zoning and planning referred to in “Planning risk” above), all of which are relevant to theGroup. The institution and enforcement of such laws and regulations could have the effect of increasingthe expense and lowering the income or rate of return from, as well as adversely affecting the value of, theGroup’s property portfolio. Any change to existing laws and regulation in the UK (including changes tothe taxation legislation and regulation relating to corporation tax, capital gains tax and VAT and anyreliefs from taxation) could affect the value of the Group’s property portfolio and/or the rental incomederived from it.
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Failure to obtain insurance
St. Modwen believes that the Group has insured its assets and properties adequately and appropriatelybased on the risks associated with the Group’s business and on industry practice. However, the Groupcannot guarantee that it will be able to obtain such insurance on comparable terms in the future and,whilst a significant proportion of such costs are reimbursed by the Group’s tenants, this may result in afailure to retain or attract tenants which could have an adverse effect on the Group’s business, results ofoperations, financial condition and/or prospects. Further, in the event that any of the Group’s propertyportfolio suffers damage that is not covered in whole or in part by insurance, the value of that asset willbe reduced. In addition, the Group may have no source of funding to repair or reconstruct the damagedasset, and there can be no certainty that any sufficient sources of funding will be available to it (either atall or on acceptable terms) for such purposes in the future.
Potential funding shortfalls in the Group’s defined benefit pension scheme
The Group operates both a defined benefit and a defined contribution pension scheme for currentemployees. The defined benefit scheme provides benefits based on final pensionable salary and is closed tonew members. As of 30 November 2011, this scheme had assets of £27.1 million, as measured underIAS 19, representing a surplus of £2.3 million over the actuarial valuation of liabilities in the scheme of£24.8 million (the £2.3 million surplus was not recognised). In the event that the market value of the assetsof the scheme declines, or that the assessed value of the scheme liabilities increases, the Group may berequired to increase its contributions to the scheme. This could have an adverse effect on the Group’sbusiness, results of operations, financial condition and/or prospects.
Competitive conditions
The Group operates in many sectors within the UK property market and it faces significant competitionfrom other UK property companies, regeneration specialists and housebuilders, including competitorswhich may have greater capital resources or other resources. Such competition may lead either to anover-supply of premises through over-development or to high prices for targeted acquisitions and newschemes due to competing bids from other potential purchasers. In addition, the Group may facesignificant competition in identifying and acquiring suitable properties. If the Group is not able tocompete effectively or maintain its current profile, the existence of such competition may have an adverseimpact on the Group, including on its ability to secure attractive tenants for its properties at satisfactoryrental rates (either on a pre-let basis or otherwise) or buyers for its properties at satisfactory prices (eitheron a pre-sale basis or otherwise) and on a timely basis and on its ability to acquire properties or sites atsatisfactory prices or terms.
The existence of such competition may also have an adverse impact on the Group’s ability to secure futurejoint venture partners and preferred developer appointments and/or the financing required for suchschemes.
Factors which are material for the purpose of assessing the market risks associated with the Bonds
Risks related to the Bonds
Structural subordination of the Bonds
The Issuer is, in part, dependent upon receipt of funds from its subsidiaries in order to fulfil its obligationsunder the Bonds. The Bonds are (subject to Condition 3(a)) unsecured obligations of the Issuer. Theobligations of the Issuer under the Bonds are therefore structurally subordinated to any liabilities of theIssuer’s subsidiaries.
Risk of early redemption
In the event that a change in law results in the Issuer becoming obliged to increase the amounts payableunder the Bonds pursuant to Condition 7, the Issuer may, at its option, redeem the Bonds early pursuantto Condition 5(b). If the Issuer redeems the Bonds under such circumstances, the redemption price will bethe principal amount of the Bonds plus any accrued interest. See “Terms and Conditions of the Bonds –Redemption and Purchase – Redemption for taxation reasons”.
In addition, the Bonds may be redeemed early, at any time, at the option of St. Modwen pursuant toCondition 5(c), at 100 per cent. of their face value or, if higher, an amount calculated by reference to theprevailing yield of the 3.7 per cent. United Kingdom Treasury Stock due 2019 plus a margin of 0.5 percent., together with any accrued interest.
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An Investor may not be able to reinvest the redemption proceeds at an effective interest rate as high as theinterest rate on the Bonds being redeemed and may only be able to do so at a significantly lower rate.Potential investors should consider investment risk in light of other investments available at that time.
Modification, waivers and substitution
The terms and conditions of the Bonds contain provisions for calling meetings of Bondholders to considermatters affecting their interests generally. These provisions permit defined majorities to bind allBondholders including Bondholders who did not attend and vote at the relevant meeting and Bondholderswho voted in a manner contrary to the majority.
The terms and conditions of the Bonds also provide that the Trustee may, without the consent ofBondholders, agree to: (i) any modification of any of the provisions of the Trust Deed that is of a formal,minor or technical nature or is made to correct a manifest error; or (ii) any other modification of, and anywaiver or authorisation of any breach or proposed breach of, any of the provisions of the Trust Deed; or(iii) the substitution of another company as principal debtor under the Bonds in place of the Issuer, in thecircumstances described in Condition 11(c) of the Terms and Conditions of the Bonds.
The EU Directive on the taxation of savings income may result in the imposition of withholding taxes in certainjurisdictions
Under EC Council Directive 2003/48/EC on the taxation of savings income (the “Savings Directive”)Member States are required to provide to the tax authorities of another Member State details of paymentsof interest (or similar income) paid by a person within its jurisdiction to (or for the benefit of) anindividual resident in that other Member State or to (or for the benefit of) certain limited types of entitiesestablished in that other Member State. However, for a transitional period, Luxembourg and Austria areinstead required (unless during that period they elect otherwise) to operate a withholding system inrelation to such payments (the ending of such transitional period being dependent upon the conclusion ofcertain other agreements relating to information exchange with certain other countries), subject to aprocedure whereby, on meeting certain conditions, the beneficial owner of the interest or other incomemay request that no tax be withheld. A number of non-EU countries and territories including Switzerlandhave adopted similar measures (a withholding system in the case of Switzerland).
The European Commission has proposed certain amendments to the Savings Directive, which may, ifimplemented, amend or broaden the scope of the requirements described above.
English law may change after the date of this Prospectus
The terms and conditions of the Bonds are based on English law in effect as of the date of issue of thisProspectus. No assurance can be given as to the impact of any possible judicial decision or change toEnglish law or administrative practice after the date of this Prospectus.
Holding CREST depository interests
Investors may hold interests in the Bonds through CREST through the issuance of CDIs issued, held,settled and transferred through CREST, representing the interests in the relevant Underlying Bonds.Holders of CDIs (the “CDI Holders”) will hold or have an interest in a separate legal instrument and notbe the legal owners of the Underlying Bonds. The rights of CDI Holders to the Underlying Bonds arerepresented by the relevant entitlements against the CREST Depository which (through CRESTInternational Nominees Limited (the “CREST Nominee”) holds interests in the Underlying Bonds.Accordingly, rights under the Underlying Bonds cannot be enforced by CDI Holders except indirectlythrough the intermediary depositaries and custodians. The enforcement of rights under the UnderlyingBonds will be subject to the local law of the relevant intermediaries. This could result in an elimination orreduction in the payments that otherwise would have been made in respect of the Underlying Bonds in theevent of any insolvency or liquidation of any of the relevant intermediaries, in particular where theUnderlying Bonds held in clearing systems are not held in special purpose accounts and are fungible withother securities held in the same accounts on behalf of other customers of the relevant intermediaries.
The rights of the CDI Holders will be governed by the arrangements between CREST, Euroclear,Clearstream, Luxembourg and the Issuer, including the CREST Deed Poll. Potential investors should notethat the provisions of the CREST Deed Poll, the CREST International Manual dated 14 April 2008 asamended, modified, varied or supplemented from time to time (the “CREST Manual”) and theCREST Rules contained in the CREST Manual applicable to the CREST International Settlement Links
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Service (the “CREST Rules”) contain indemnities, warranties, representations and undertakings to begiven by CDI Holders and limitations on the liability of the CREST Depository. CDI Holders are boundby such provisions and may incur liabilities resulting from a breach of any such indemnities, warranties,representations and undertakings in excess of the amounts originally invested by them. As a result, therights of and returns received by CDI Holders may differ from those of holders of Bonds which are notrepresented by CDIs.
In addition, CDI Holders may be required to pay fees, charges, costs and expenses to theCREST Depository in connection with the use of the CREST International Settlement Links Service (the“CREST International Settlement Links Service”). These will include the fees and expenses charged by theCREST Depository in respect of the provision of services by it under the CREST Deed Poll and any taxes,duties, charges, costs or expenses which may be or become payable in connection with the holding of theBonds through the CREST International Settlement Links Service.
Potential investors should note that none of the Issuer, the Joint Lead Managers, the Trustee or the PayingAgent will have any responsibility for the performance by any intermediaries or their respective direct orindirect participants or accountholders of their respective obligations under the rules and proceduresgoverning their operations.
Investors should note that the CDIs are the result of the CREST settlement mechanics and are not thesubject of this Prospectus.
No formal credit ratings
The Bonds will not be assigned a credit rating by any rating agency on issue and nor does the Issuercurrently have any intention of applying for a credit rating from any credit rating agency. However, oneor more independent credit rating agencies may assign credit ratings to some or all of the Bonds prior totheir redemption. Any such ratings may not reflect the potential impact of all risks relating to the market,additional factors discussed above and other factors that may affect the value of the Bonds. A credit ratingis not a recommendation to buy, sell or hold securities and may be revised or withdrawn by the relevantrating agency at any time.
Risks related to the market generally
Set out below is a brief description of the principal market risks, including liquidity risk, exchange raterisk, interest rate risk and credit risk:
There may not be a liquid secondary market for the Bonds and their market price may be volatile
The Bonds may have no established trading market when issued, and one may never develop. If a marketdoes develop, neither of the Joint Lead Managers nor any other person is under an obligation to maintainsuch a market for the life of the Bonds and it may not be liquid. Therefore, Investors may not be able tosell their Bonds easily or at prices that will provide them with a yield comparable to similar investmentsthat have a developed secondary market. The Bonds are sensitive to interest rate, currency or market risksand are designed to meet the investment requirements of limited categories of investors. Accordingly, theBonds generally will have a limited secondary market. Illiquidity may have a severely adverse effect on themarket value of Bonds.
Registered market-makers on the ORB are expected to be appointed in respect of the Bonds from the dateof admission of the Bonds to trading. However, such market-makers may not continue to act for the lifeof the Bonds. If a replacement market-maker was not appointed in such circumstances, this could have anadverse impact on an Investor’s ability to sell the Bonds.
Yield
The indication of yield stated within this Prospectus applies only to investments made at (as opposed toabove or below) the issue price of the Bonds. If an Investor invests in the Bonds at a price other than theissue price of the Bonds, the yield on the investment will be different from the indication of yield on theBonds as set out in this Prospectus.
Realisation from sale of the Bonds
If Investors choose to sell the Bonds at any time prior to their maturity, the price received from such salecould be less than the original investment made by such Investors. Factors that will influence the price may
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include, but are not limited to, market appetite, inflation, the time of redemption, interest rates and thecurrent financial position and an assessment of the future prospects of the Issuer.
Exchange rate fluctuations and exchange controls may adversely affect Investors’ return on their investments inthe Bonds and/or the market value of the Bonds
The Issuer will pay principal and interest on the Bonds in Sterling. This presents certain risks relating tocurrency conversions if an Investor’s financial activities are denominated principally in a currency orcurrency unit (the “Investor’s Currency”) other than Sterling. These include the risk that exchange ratesmay significantly change (including changes due to devaluation of Sterling or revaluation of the Investor’sCurrency) and the risk that authorities with jurisdiction over the Investor’s Currency may impose ormodify exchange controls. An appreciation in the value of the Investor’s Currency relative to Sterlingwould decrease: (i) the Investor’s Currency-equivalent yield on the Bonds; (ii) the Investor’s Currencyequivalent value of the principal payable on the Bonds; and (iii) the Investor’s Currency equivalent marketvalue of the Bonds.
Government and monetary authorities may impose (as some have done in the past) exchange controls thatcould adversely affect an applicable exchange rate. As a result, Investors may receive less interest orprincipal than expected, or no interest or principal.
Changes in interest or inflation rates may adversely affect the value of the Bonds
The Bonds bear interest at a fixed rate rather than by reference to an underlying index. Accordingly,potential investors should note that if interest rates rise, then the income payable on the Bonds mightbecome less attractive and the price that Investors could realise on a sale of the Bonds may fall. However,the market price of the Bonds from time to time has no effect on the total income Investors receive onmaturity of the Bonds if the Investor holds the Bonds until the Maturity Date. Further, inflation willreduce the real value of the Bonds over time, which may affect what Investors could buy with theirinvestment in the future and may make the fixed rate payable on the Bonds less attractive in the future,again affecting the price that Investors could realise on a sale of the Bonds.
The clearing systems
Because the Global Bond may be held by or on behalf of Euroclear and Clearstream, Luxembourg,Investors will have to rely on their procedures for transfer, payment and communication with the Issuer.
The Bonds will be represented by the Global Bond. Such Global Bond may be deposited with a commondepositary for Euroclear and Clearstream, Luxembourg. Except in the circumstances described in theGlobal Bond, Investors will not be entitled to receive definitive Bonds. Euroclear and Clearstream,Luxembourg will maintain records of the interests in the Global Bond. While the Bonds are represented bythe Global Bond, Investors will be able to trade their interests only through Euroclear or Clearstream,Luxembourg.
While the Bonds are represented by the Global Bond, the Issuer will discharge its payment obligationsunder such Bonds by making payments to the common depositary for Euroclear and Clearstream,Luxembourg for distribution to their account holders. A holder of an interest in the Global Bond mustrely on the procedures of Euroclear and Clearstream, Luxembourg to receive payments under the Bonds.The Issuer has no responsibility or liability for the records relating to, or payments made in respect of,interests in the Global Bond.
Holders of interests in the Global Bond will not have a direct right to vote in respect of the Bonds. Instead,such holders will be permitted to act only to the extent that they are enabled by Euroclear or Clearstream,Luxembourg.
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FORWARD-LOOKING STATEMENTS
This Prospectus includes statements that are, or may be deemed to be, ‘forward-looking statements’. Theseforward-looking statements can be identified by the use of forward-looking terminology, including theterms ‘believes’, ‘estimates’, ‘anticipates’, ‘expects’, ‘intends’, ‘may’, ‘will’, or ‘should’ or, in each case, theirnegative or other variations or comparable terminology, or by discussions of strategy, plans, objectives,goals, future events or intentions. These forward-looking statements include all matters that are nothistorical facts. They appear in a number of places throughout this Prospectus and include, but are notlimited to, the following: statements regarding the intentions, beliefs or current expectations of the Issuerand the Issuer and the Group concerning, amongst other things, the Group’s results of operations,financial condition, liquidity, prospects, growth, strategies and the industries in which the Group operates.
By their nature, forward-looking statements involve risk and uncertainty because they relate to futureevents and circumstances. Forward-looking statements are not guarantees of future performance and theactual results of the Group’s operations, financial condition and liquidity, and the development of thecountries and the industries in which the Group operates may differ materially from those described in, orsuggested by, the forward-looking statements contained in this Prospectus. In addition, even if the resultsof operations, financial condition and liquidity, and the development of the countries and the industries inwhich the Group operates, are consistent with the forward-looking statements contained in thisProspectus, those results or developments may not be indicative of results or developments in subsequentperiods. These and other factors are discussed in more detail under “Risk Factors” and “Description ofSt. Modwen Properties PLC and the Group”. Many of these factors are beyond the control of the Issuerand the Group. Should one or more of these risks or uncertainties materialise, or should underlyingassumptions prove incorrect, actual results may vary materially from those described in this Prospectus asanticipated, believed, estimated or expected. Except to the extent required by laws and regulations, theIssuer does not intend, and does not assume any obligation, to update any forward-looking statements setout in this Prospectus.
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DOCUMENTS INCORPORATED BY REFERENCE
The following documents which have previously been published or are published simultaneously with thisProspectus and have been filed with the FSA shall be incorporated in, and form part of, this Prospectus:
(a) the auditors’ review and unaudited consolidated financial statements of the Issuer for the six monthperiod ended 31 May 2012 set out on pages 8 to 24 of the Issuer’s Half Year Report 2012;
(b) the auditors’ report and audited consolidated financial statements of the Issuer for the year ended30 November 2011 set out on pages 77 to 115 of the Issuer’s Annual Report for the year ended30 November 2011;
(c) the auditors’ report and audited consolidated financial statements of the Issuer for the year ended30 November 2010 set out on pages 45 to 78 of the Issuer’s Annual Report for the year ended30 November 2010; and
(d) the auditors’ report and audited consolidated financial statements of the Issuer for the year ended30 November 2009 set out on pages 67 to 100 of the Issuer’s Annual Report for the year ended30 November 2009.
Such documents shall be incorporated in and form part of this Prospectus, save that any statementcontained in a document which is incorporated by reference herein shall be modified or superseded for thepurpose of this Prospectus to the extent that a statement contained herein modifies or supersedes suchearlier statement (whether expressly, by implication or otherwise). Any statement so modified orsuperseded shall not, except as so modified or superseded, constitute a part of this Prospectus.
Any documents themselves incorporated by reference in the documents incorporated by reference in thisProspectus shall not form part of this Prospectus.
Those parts of the documents incorporated by reference in this Prospectus which are not specificallyincorporated by reference in this Prospectus are either not relevant for prospective investors in the Bondsor the relevant information is included elsewhere in this Prospectus.
Copies of documents incorporated by reference in this Prospectus can be obtained without charge from theregistered office of the Issuer.
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USE OF PROCEEDS
The offer of the Bonds is being made in order to raise funds for general corporate purposes and todiversify the funding base of St. Modwen. The net proceeds of the issue of the Bonds, to be determinedfollowing completion of the Offer Period and set forth in the Sizing Announcement, will be used for thegeneral corporate purposes of the Group including to reduce drawings under St. Modwen’s existingrevolving credit facilities.
The expenses incurred in connection with the transaction will be determined following completion of theOffer Period. St. Modwen will incur arrangement, management and distribution expenses, which will be1.25 per cent. of the aggregate gross proceeds of the Bonds to be issued. In addition to such expenses, atthe date of this Prospectus St. Modwen estimates that it will incur £3,000 of regulatory fees (includingthose relating to listing and admission to trading) and £280,000 of other expenses.
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DESCRIPTION OF ST. MODWEN PROPERTIES PLCAND THE GROUP
Overview
St. Modwen is the UK’s leading regeneration specialist. The Group operates across many sectors of theproperty market, from its Birmingham-based head office, a network of seven regional offices and throughjoint venture or collaboration arrangements with industry-leading partners. The Group’s propertyportfolio is located solely in the UK, is valued at £1.1 billion and is spread across income-producinginvestments (51 per cent. by value), residential land (37 per cent.) and commercial land and developments(12 per cent.). With its actively managed landbank of development opportunities comprising more than5,800 developable acres (the “Landbank”), the Group is focused wholly upon regeneration and the longterm development of commercial and residential property and has a 25 year track record of adding valueby managing schemes through the planning process, remediating contaminated land and pursuing anactive programme of asset management and development.
Key projects in which the Group is currently involved are described below. See “Major Landbankprojects” and “Proposed major project”.
The Group’s registered office is located at Sir Stanley Clarke House, 7 Ridgeway, Quinton Business Park,Birmingham B32 1AF and its telephone number is +44 (0)121 222 9400.
Background and history
St. Modwen was incorporated on 3 February 1939. St. Modwen in its present form was created by thereverse takeover in April 1986 by Redman Heenan International plc of Clarke St. Modwen Properties Ltd.Following the takeover, the company changed its name to St. Modwen Properties PLC.
In the late 1980s, St. Modwen grew as a result of a development programme based initially on enterprisezone and industrial schemes, which was then extended to include retail schemes, office parks andmixed-use schemes. During the 1990s, active steps were taken by St. Modwen to increase the Group’srental income. This period saw the establishment of St. Modwen’s regeneration and development strategyand a major expansion of the Group’s range of partnerships with landowners and local authorities. In1997, St. Modwen entered into a significant joint venture with Salhia Real Estate Company K.S.C. toestablish an investment partnership which now holds a number of schemes with long-term developmentpotential, including the site at the Elephant and Castle, London. The Group is now established as theUK’s leading regeneration specialist and an expert in brownfield renewal. More recent significantacquisitions have included major portfolios from Alstom and Marconi and large industrial sites such as a2,500 acre portfolio of disused sites in South Wales from BP, the former 90 acre Corus steelworks atLlanwern, also in South Wales, the former MG Rover site at Longbridge in Birmingham and, throughProject MoDEL, with its joint venture partner, VINCI PLC, a portfolio of sites in North London formerlyowned by the Ministry of Defence. The Group has also been selected by many local authorities forsubstantial long term town centre regeneration schemes such as Wembley in North London, EdmontonGreen in Enfield, Wythenshawe in Manchester and Great Homer Street in Liverpool.
Group strengths
The Group’s management believes that St. Modwen is the UK’s leading regeneration specialist for thefollowing reasons:
● The Group is focused wholly upon regeneration. It has a 25 year track record of adding value bymanaging schemes through the planning process, remediating contaminated land and pursuing anactive programme of asset management and development.
● The Group operates across many sectors of the property market from a Birmingham-based headoffice, a network of seven regional offices, and through joint venture or collaboration arrangementswith industry-leading partners.
● St. Modwen has an experienced management team with extensive operational expertise inregeneration and brownfield renewal.
● The Group has proved itself to be resilient to challenging economic times as a result of its broadexpertise and its Landbank, which has provided it with the flexibility to move with market demandsand pursue value-creating opportunities.
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● St. Modwen’s shares are listed on the premium segment of the London Stock Exchange and it is inthe FTSE250 index. St. Modwen’s share price has performed well over the past 12 months. As of16 October 2012, being the last practicable date prior to the publication of this Prospectus, the pricewas 198.0 pence per share, an increase of more than 54 per cent. from the price of 128.5 pence pershare as of 17 October 2011.
A stable business with a solid balance sheet. As of 31 May 2012:
● the Group’s property portfolio, including its share of joint ventures and associates, was valued at£1.1 billion;
● the Group’s banking facilities amounted to £477 million, with no facility maturing beforeNovember 2014 and with a weighted average debt maturity of 3.2 years (as of 30 November 2011:3.5 years);
● the weighted average interest payable under the Group’s banking facilities was 5.4 per cent. for thesix months ended 31 May 2012 (for the year ended 30 November 2011: 5.6 per cent.);
● the Group, including its share of joint ventures and associates, had net debt of £464.2 million (as of30 November 2011: £431.6 million; as of 30 November 2010: £409.2 million; as of 30 November2009: £422.7 million; as of 30 November 2008: £523.1 million) giving the Group committed butundrawn headroom of £107 million and a see-through loan to value(1) ratio of 42 per cent. (as of30 November 2011: 39 per cent.; as of 30 November 2010: 39 per cent.; as of 30 November 2009:42 per cent.; as of 30 November 2008: 46 per cent.);
● the Group, including its share of joint ventures and associates, had interest cover(2) for the 12 monthperiod ended 31 May 2012 of 3.1 and for the year ended 30 November 2011 of 2.7 (year ended30 November 2010: 2.4; year ended 30 November 2009: 2.1; year ended 30 November 2008: 2.2);and
● 79 per cent. of the Group’s net debt (excluding its subsidiary VSM Estates Limited) was hedged (asof 30 November 2011: 86 per cent.).
Reliable recurring revenue streams from a £558 million portfolio of income-producing assets comprisingmore than 100 commercial properties.
● The Group’s net rental income, including its share of joint ventures and associates, for the12 month period ended 30 November 2011 was £35.5 million, having increased steadily since 2008and, together with other income from rental assets, typically covers the operating costs of thebusiness.
● St. Modwen believes that there is strong demand for the Group’s properties. As of 31 May 2012,30 November 2011 and 30 November 2010, more than 87 per cent. of the Group’s property that wasavailable for rent was occupied, with more than 82 per cent. occupied as of 30 November 2009 andmore than 83 per cent. as of 30 November 2008.
● Over a third of the Group’s property portfolio is located in London and the South East. By value,50 per cent. of the Group’s residential assets are located in these regions.
● As of 31 May 2012, the weighted average lease length for the Group’s income-producing propertieswas approximately 5.3 years (as of 30 November 2011: 4.6 years).
Diverse UK-wide portfolio:
● The Group’s property portfolio is spread across income-producing investments (51 per cent. byvalue), residential land (37 per cent.) and commercial land and developments (12 per cent.).
● The Group seeks to avoid over-exposure to a single scheme, tenant or sector (for example, as of31 May 2012, the Group’s income-producing properties were occupied by over 1,700 tenants,ranging from multinational businesses to sole traders). It has a UK-wide portfolio with the aimbeing to avoid over-exposure to a particular region.
(1) See-through loan to value – The percentage of the Group’s net debt (including its share of joint ventures and associates) as a proportion
of its property portfolio.
(2) Interest cover – The ratio of operating income to interest for the Group including its share of joint ventures and associates. Operating
income is the sum of net rental income, other income and property profits (before net realisable value provisions) and interest is net
finance costs stated before the mark-to-market of derivatives and other non-cash items.
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● The Group’s broad expertise and its Landbank allows the Group flexibility to adapt to marketdemands and pursue opportunities, which should generate value.
Strong, high profile pipeline:
● The Group’s current major projects involving its Landbank include the Elephant and Castleredevelopment in London, the development of Swansea University’s New Bay Science andInnovation Campus and the development of the former MG Rover site at Longbridge,Birmingham. These projects are in addition to the proposed development project at New CoventGarden Market, London.
Conservative approach to development pipeline:
● The Group seeks to expand its Landbank in a manner which is capital efficient, such as through theacquisition of income-producing properties or acquiring land through development agreements orfor minimum initial outlay. The Group seeks to enhance the value of the Landbank using activeasset management, including managing retained assets with a view to securing income, using itsplanning and development expertise to navigate complex and long-term projects through theplanning process as well its ability to assess and manage remediation risk. Through these activitiesand by focusing on pre-let and pre-sold opportunities, the Group seeks to maintain a conservativeapproach to its development pipeline.
Strategy
The Group’s operational strategy is focused on the development of commercial and residential propertyfrom its Landbank through remediation, management of the planning process, asset management,development and delivery. The timeframe for the Group’s investments are long-term, often up to 20 years,and assets are typically held both for income stream and future development.
Recurring income
Whilst St. Modwen’s primary business is regeneration, St. Modwen seeks to ensure that a majorproportion of the Group’s assets generate income prior to development. This consists of core rentalincome, supported by other income derived in each case from income-producing properties, with the aimbeing that those income streams cover the operating costs of the Group (being property outgoings,overhead and interest) as detailed in the table below.
For thesix monthsended
For the year ended 30 November 31 May5555555555555555555 5555
2008 2009 2010 2011 20125555 5555 5555 5555 5555
(£ million, except for percentages)
Net rental income ....................... 33.2 33.5 33.7 35.5 18.3Other income .............................. 7.3 1.8 3.1 3.2 1.5Operating costs(1) ......................... 41.9 34.5 41.3 39.7 19.2Net rental and other income as a percentage of operating costs.. 97% 102% 89% 97% 103%
(1) Operating costs – Administrative expenses plus net finance costs (excluding the mark-to-market of derivative financial instruments and
other non-cash items) for the Group, including its share of joint ventures and associates.
For further detail, please see note 2 to the Group’s financial statements for the six month period ended31 May 2012 incorporated by reference in this Prospectus.
Landbank
St. Modwen believes that a key differentiating feature of the Group is its Landbank of future developmentopportunities. Principally consisting of properties acquired in their raw, un-remediated state, theLandbank currently comprises over 5,800 developable acres. As of the indicated dates, the property in theLandbank was designated in the development categories set out in the table below:
As of 31 May 2012 and 30 November 2011, 2010, 2009 and 2008, the Group’s (together with its share ofjoint ventures and associates) property portfolio was valued at £1.1 billion. As of 31 May 2012, 66 percent. (by value) of the Landbank was held directly by members of the Group, 20 per cent. was heldthrough development agreements and 14 per cent. was held through the Group’s joint ventures.
The Group seeks to expand its Landbank in a manner which is capital efficient, such as through theacquisition of income-producing properties or acquiring land through development agreements or forminimum initial outlay. The Group seeks to enhance the value of the Landbank using active assetmanagement, including managing retained assets with a view to securing income, using its planning anddevelopment expertise to navigate complex and long term projects through the planning process as well itsability to assess and manage remediation risk. The property valuation gains of the Group arising fromactive management of its property portfolio (including its share of joint ventures and associates) for eachof the indicated periods are set out in the table below:
For thesix monthsended
For the year ended 30 November 31 May5555555555555555555 5555
2008 2009 2010 2011 20125555 5555 5555 5555 5555
(£ million)
Gains arising from active asset management .................... 65 27 18 33 35
(1) Property valuation gains – Property revaluations and movements in net realisable value provisions.
St. Modwen estimates that approximately 15 per cent. of the Landbank should commence developmentduring or before 2017, 20 per cent. between 2018 and 2022 (inclusive) and 65 per cent. after 2022.
Delivery
The Group seeks to build-out assets in response to market conditions, with a mixture of pre-let andpre-sold buildings forming the Group’s annual construction programme. The Group aims to sell assetsonce no further significant value can be added, and the capital is then recycled into new schemes. TheGroup has consistently delivered property profits as set out in the table below:
For thesix monthsended
For the year ended 30 November 31 May5555555555555555555 5555
(1) Property profits – Development profit (before the deduction of net realisable value provisions) plus gains on disposals of investments/
investment properties for the Group, including its share of joint ventures and associates.
Portfolio
The Group’s property portfolio comprises the following three categories of assets in the UK:income-producing property (51 per cent. by value); residential (37 per cent.); and commercial land anddevelopment (12 per cent.). Over a third of the Group’s property portfolio by value (including 50 per cent.by value of the Group’s residential assets) is located in London and the South East.
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Income-producing properties
The Group’s income-producing properties (valued at £558 million as of 31 May 2012) represent industrial,retail and office assets. While all assets in the Group’s portfolio are held with a view to generating futurevalue, St. Modwen seeks to ensure that a major proportion of these assets generate income prior todevelopment, with the aim being that this income is used to meet the expenses and financing costs of theGroup’s business. See “Recurring income” above for further detail. The Group’s income-producingproperties typically have low affordable rents on relatively short tenancies. As of 31 May 2012, the Group,including its joint ventures and associates, held over 100 income-producing properties occupied by over1,700 tenants which produced an equivalent yield(3) of 9.2 per cent.
Residential
The Group acquires sites with potential for residential development and seeks to add value to the landthroughout the development process, realising value through land sales and through development, eitherin-house or through joint ventures with other developers. As of 31 May 2012, the Group’s residentialportfolio comprised 37 per cent. of the Group’s property portfolio with a valuation of £406 million(covering 1,682 acres and comprising 20,000 plots with planning recognition). The residential portfolio isdelivered through three routes to market:
● Residential land sales: The development and sale of predominantly brownfield sites which haveviable planning permission in place. Since May 2011, the Group has sold or has contracted to sellover £100 million of residential land.
● Persimmon joint arrangement: In July 2010, the Group entered into a joint arrangement withPersimmon Homes PLC. Under this arrangement, they currently plan to jointly develop over2,000 residential units on eight sites, three of which are active (833 units – land valued at£22 million, of which the Group’s share of the development profit relevant to that valuation is£13 million) and five of which are committed (1,477 units – land valued at £73 million, of which theGroup’s share of the development profit relevant to that valuation is £29 million).
● St. Modwen Homes: Developments under the Group’s in-house building brand from two activesites (213 units – land valued at £2 million, of which the Group’s share of the development profitrelevant to that valuation is £3 million), with six further sites planned (1,079 units – land valued at£43 million, of which the Group’s share of the development profit relevant to that valuation is£36 million), which provides a route to market using the Group’s own resources and is developinga recurring income stream.
In the nine month period ended 30 September 2012, the Group achieved 178 house sale completions(St. Modwen Homes: 111 and Persimmon joint arrangement: 67) and currently has a further128 properties reserved or under contract (St. Modwen Homes: 72 and Persimmon joint arrangement: 56).Cash received by the Group in the six months to 31 May 2012 was £14 million (St. Modwen Homes:£8 million and Persimmon joint arrangement: £6 million).
Commercial land and development
The Group seeks to acquire land for commercial development at reduced capital outlay and to manage itsdevelopment though the remediation and planning processes, taking advantage of local market conditionsto release land for development at the most appropriate time.
Commercial development which the Group is currently undertaking includes:
● Hednesford, Cannock where construction works are underway at Victoria Shopping Park, whichcomprises an 80,000 sq ft foodstore that has been pre-sold to Tesco, plus associated retail space.This scheme is due to open in December 2012.
● Teal Park, Lincoln where the construction of the 135,000 sq ft office and production facility forSiemens is close to practical completion.
● Great Homer Street, Liverpool where planning consent has been granted for 114,000 sq ft foodstore(to which Sainsbury’s has already committed), 80,000 sq ft of additional retail units, 80,000 sq ft ofindustrial units, 480 new homes and 40,000 sq ft of community facilities including a new library,market and community health centre.
(3) Equivalent yield – the weighted average of the initial yield and reversionary yield; represents the return a property will produce based
on the timing of the income received.
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Major Landbank projects
The Group’s current major projects involving its Landbank are described below.
Elephant and Castle, London (Acquired 2002)
This is a project to carry out an extensive redevelopment in the Elephant and Castle area to create amixed-use centre. The property, owned by the Key Property Investments Limited group (“KPI Group”), ajoint venture between St. Modwen and Salhia Real Estate Company K.S.C., currently comprises a220,000 sq ft shopping centre with 80,000 sq ft of offices above on a 3.5 acre site. KPI Group has agreedterms with the London Borough of Southwark and is expecting to conclude a binding agreement for theregeneration of the shopping centre. It is expected that KPI Group will agree a co-operation agreementwith Lend Lease and the London Borough of Southwark under which the three parties will work togetherwith the aim of ensuring a comprehensive redevelopment of the area. KPI Group intends to make aplanning application in 2013, following public consultations. The scheme is expected to provide450,000 sq ft of retail and leisure space and up to 1,000 residential units. The development, which mayinclude additional partners, is expected to commence on site in 2015.
Swansea University’s New Bay Science and Innovation Campus, Swansea (Land acquired 2009)
St. Modwen is in exclusive negotiations with Swansea University to develop the first phase of SwanseaUniversity’s New Bay Science and Innovation Campus with an estimated value of £200 million. This phaseof the project comprises 700,000 sq ft of development, including 430,000 sq ft of academic space for whichthe University has secured funding, 900 student apartments and associated retail space. An outlineplanning application for this phase was approved by Neath Port Talbot County Borough Council inFebruary 2011 and a reserve matters planning application was submitted in September 2012, in respect ofwhich it is anticipated that approval will be granted in early 2013. The Board expects a developmentagreement with Swansea University to be entered into at that time, and for development of this project tocommence later in 2013. The entire campus is proposed to be developed on the Group’s 65 acre site.
Longbridge, West Midlands (Acquired 2001 – 2004)
This project is located on the site of the former MG Rover car manufacturing facility, comprising468 acres.
Following an intensive four year remediation programme, the Group has completed development of over150,000 sq ft of office and industrial space which is over 95 per cent. occupied. In addition, the Group hascompleted the £66 million 250,000 sq ft new Bournville College which opened in September 2011 and hasbuilt and, in April 2012, delivered the £5 million youth centre, known as “The Factory”, to BirminghamCity Council.
Construction work is ongoing in relation to the first phase of the £70 million “Town Centre” development.St. Modwen expects the following to open in 2013: an 85,000 sq ft retail store, pre-sold to Sainsbury’s (andin relation to which the Group received a payment of £20 million in December 2011), a 75 bedroomPremier Inn hotel and a Beefeater restaurant, 24 retail units and restaurants – of which 95 per cent. areeither pre-sold, pre-let or under offer – and a two acre park forming the centrepiece of the Town Centredevelopment. Plans have been submitted for the next phase of the Town Centre, which is anticipated tocomprise a 135,000 sq ft anchor retail store, car parking and associated access, landscaping andinfrastructure.
Combined property profits recognised in respect of the above schemes were £5.1 million in the years ended30 November 2006 to 30 November 2009, £1.7 million in the year ended 30 November 2010, £2.6 millionin the financial year ended 30 November 2011 and £5.7 million in the six months to 31 May 2012.
The Group, under its housing brand St. Modwen Homes, has also completed the first phase of 113 homesat Longbridge, known as “Park View”, at which more than 90 per cent. of the properties have been soldor reserved (achieving sales rates to date of more than twice the national average). A planning applicationunder the Group’s joint arrangement with Persimmon for a further 229 new residential properties onapproximately 20 acres of the Longbridge site (with an anticipated land value of £14 million) was grantedin May 2012. The Group will receive 50 per cent. of the profit attributable to this development. In total,there is planning recognition for approximately 2,000 residential properties across the 468 acre site.
In addition, the Longbridge site continues to generate rental income from the Technology Park and theCofton Centre, as well as from the lease with Shanghai Automotive.
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Proposed major project
The Group’s other major project – which is at proposal stage only – is described below.
New Covent Garden Market, London (Selected as preferred development partner)
In March 2012, St. Modwen, together with its partner, VINCI PLC, was selected by the Covent GardenMarket Authority as the preferred development partner for New Covent Garden Market, at Nine Elms,London. The proposed multi-phased project is anticipated to have a gross development value ofapproximately £2 billion and would involve the regeneration of New Covent Garden Market through therationalisation of a 57 acre site over a five year period, including the development of a new 500,000 sq ftmodern facility to accommodate approximately 200 businesses that operate in the New Covent GardenMarket. It is proposed that the project would be funded by the release and redevelopment of 20 acres ofsurplus land into a residential led mixed-use regeneration scheme.
The award of the development contract in relation to this project is subject to finalisation of contracts. TheBoard is aiming for the development contract to be entered into before the end of 2012 and, after that, fordevelopment to commence in 2014.
Current trading and prospects
St. Modwen has continued to perform well following the publication of its 2012 Half Year Report. TheGroup’s residential portfolio and major projects continue to benefit from the Group’s active assetmanagement capability, its ability to advance schemes through the planning process to development anddelivery and the residential landbank (residential land sales, Persimmon joint arrangement andSt. Modwen Homes) continuing to realise the potential contained within the improving marketplace,particularly in the South East where new house sales have recently increased. Sales levels in other parts ofthe UK have remained broadly stable.
St. Modwen believes that the market for non-prime property remains challenging, as it has been in recentyears. This is providing the Group with some acquisition opportunities but, as a result of general sectorsentiment, may also put pressure on book valuations for its income-producing properties. However,notwithstanding difficult market conditions, the Group’s income-producing properties continue toperform well and in the six months ended 31 May 2012 generated income in excess of the Group’soverhead and interest costs.
Board of Directors
The Directors, all of whose business addresses are at Sir Stanley Clarke House, 7 Ridgeway, QuintonBusiness Park, Birmingham B32 1AF, are as follows:
Bill Shannon CA (Non-executive Chairman)
Mr. Shannon was appointed as a non-executive director and Chairman Designate in October 2010 andbecame Chairman following St. Modwen’s annual general meeting in March 2011. He is a non-executivedirector of Johnson Service Group PLC and The Rank Group Plc. Previously, he was chairman ofAEGON plc, a non-executive director of Barratt Developments PLC and Matalan plc and an executivedirector of Whitbread plc.
Bill Oliver BSc, FCA (Chief Executive)
Mr. Oliver joined St. Modwen as Finance Director in 2000. He was appointed as Managing Director in2003 and Chief Executive in 2004. He has over 30 years’ experience within the housebuilding and propertysectors.
Michael Dunn BSc, FCA (Group Finance Director)
Mr. Dunn joined St. Modwen in December 2010 from May Gurney Integrated Services plc, theAIM-listed infrastructure support services business, where he spent five years as Group Finance Director.A chartered accountant, Mr. Dunn was Finance Director of Carillion Building and Carillion PrivateFinance prior to joining May Gurney.
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Steve Burke (Construction Director)
Mr. Burke joined St. Modwen as Construction Director in 1995 and was appointed to the Board as adirector in November 2006. He was previously a contracts director and construction manager with anumber of national contracting companies (including Balfour Beatty and Clarke Construction).
Simon Clarke (Non-executive Director)
Mr. Clarke is a Non-executive Director, who was appointed in 2004. He is chairman of Dunstall HoldingsLtd. Mr. Clarke was previously Deputy Chairman of Northern Racing PLC and a director and theVice-Chairman of the Racecourse Association.
David Garman BA, FCILT (Senior Independent Non-Executive Director)
Mr. Garman was appointed as a Non-executive Director in April 2010 and became St. Modwen’s SeniorIndependent Director in April 2011. He was formerly Chief Executive of TDG plc and the Allied Bakeriessubsidiary of Associated British Foods plc, a non-executive director of Kewill plc and senior independentdirector of Victoria PLC and Carillion plc. He is currently a senior independent director of Phoenix ITGroup PLC and a founder member of The Oakwood Partnership.
Lesley James CBE, MA, CCIPD (Non-executive Director)
Ms. James is a Non-executive Director appointed in October 2009. She is currently Chairman of theRemuneration Committee. Ms. James was formerly HR Director of Tesco PLC and a non-executivedirector of Queens Moat Houses plc, Care UK plc, Alpha Airports Group PLC, Inspicio plc, LibertyInternational PLC, Selfridges PLC and the West Bromwich Building Society. She is currently anon-executive director of Anchor Trust.
Katherine Innes Ker MA, DPhil (Non-executive Director)
Ms. Ker is a Non-executive Director appointed in October 2009. She was formerly chairman ofVictoria PLC and a non-executive director of The Television Corporation PLC, Fibernet Group plc,Williams Lea Plc, Gyrus Group PLC, Shed Media PLC, Bryant Holdings plc, Ordnance Survey,ITVDigital plc and Taylor Wimpey PLC. Ms. Ker is currently senior independent director of TribalGroup plc and a non-executive director of The Go-Ahead Group plc.
John Salmon FCA (Non-executive Director)
Mr. Salmon is a Non-executive Director, who was appointed in 2005. He is currently Chairman of theAudit Committee. Mr. Salmon was formerly a partner of PricewaterhouseCoopers LLP and a memberand former Deputy Chairman of its supervisory board. He is currently a trustee and council member ofthe British Heart Foundation.
The principal activities outside of St. Modwen and the Group of the Directors (where these are significantwith respect to St. Modwen and the Group) are set out below. Each position listed below is that of adirector unless it has been stated otherwise.
Name and position Principal activities outside of St. Modwen and the Group555555 5555555555555555
Bill Shannon ......................................... Johnson Service Group PLCNon-executive Chairman The Rank Group PLC
Bill Oliver ............................................. NoneChief Executive
Michael Dunn ....................................... NoneGroup Finance Director
Steve Burke .......................................... NoneConstruction Director
Simon Clarke ........................................ Agricultural Industrial Services LimitedNon-executive Director Racing Welfare
The Stable Lads Welfare Trust Housing Association LimitedDunstall Holdings LimitedRea Valley Tractors LimitedDunstall Leasing LimitedDunstall Transport Limited
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Name and position Principal activities outside of St. Modwen and the Group555555 5555555555555555
David Garman ...................................... The Lodge (Packhorse Road) Management Company Limited Non-executive Director (director and secretary)
Phoenix IT Group PLCThe Oakwood Partnership Limited (director and secretary)Deritend Industries LimitedJLA EquityCo LimitedClub 7 Limited
Katherine Innes Ker .............................. Tribal Group PLCNon-executive Director The Go-Ahead Group PLC
Lesley James ........................................ Anchor TrustNon-executive Director Anchor Trust Trading Limited
Hell-Sing Productions Limited
John Salmon ......................................... Stormont SchoolNon-executive Director British Heart Foundation (member)
As of the date of this Prospectus, there are no potential conflicts of interest between any duties owed toSt. Modwen by any of the Directors and their private interests or other duties.
Board composition and committees
The Board operates within the terms of its written authorities, which include a schedule of mattersreserved for the approval of the Board. The Board currently consists of the Non-Executive Chairman,three Executive Directors and five Non-executive Directors. The composition of the Board provides anappropriate blend of experience and qualifications, and the number of Non-executives provides a strongbase for ensuring appropriate corporate governance of St. Modwen. The Board’s decisions areimplemented by the Executive Directors. The Chairman and the Non-executive Directors also meet duringthe year without the Executive Directors being present.
David Garman is the Senior Independent Director. He is available for consultation by shareholders,whenever appropriate.
In support of the principles of good corporate governance, the Board has established an Audit Committee,a Remuneration Committee and a Nomination Committee.
Remuneration Committee
The Remuneration Committee comprises Lesley James (as chairman), David Garman, Katherine InnesKer, John Salmon and Bill Shannon. It is responsible for determining and agreeing with the Board theframework or broad policy for the remuneration of the Executive Directors, the Chairman, the CompanySecretary and such other members of the executive management as it is designated to consider. It isfurthermore responsible for determining the total individual remuneration packages of each Directorincluding, where appropriate, bonuses, incentive payments and share options or other share awards. Theremuneration of the Non-executive Directors is considered by the Board following recommendations bythe Executive Directors.
Audit Committee
The Audit Committee comprises John Salmon (as chairman), David Garman, Katherine Innes Ker andLesley James. It is responsible for monitoring the integrity of the financial statements, including formalannouncements relating to its performance, and considers the appropriateness of accounting policies. TheCommittee also reviews the adequacy and effectiveness of the company’s internal controls and riskmanagement systems. It considers the work and plans of the Group’s internal audit function and assessesthe function’s effectiveness, and reviews reports and plans from, and consults with, the external auditors,monitoring their independence and effectiveness.
Nomination Committee
The Nomination Committee comprises Bill Shannon (as chairman), David Garman and Lesley James. Itis responsible for reviewing the structure, size and composition of the Board, succession planning,including the retirement and appointment of Board members and making appropriate recommendationsto ensure there is an appropriate mix of skills and experience on the Board.
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Corporate governanceThe principal corporate governance rules applicable to St. Modwen are the UK Corporate GovernanceCode, the Financial Services Authority’s Listing Rules and the Financial Services Authority’s Disclosureand Transparency Rules.
Throughout the year ended 30 November 2011, St. Modwen complied with the UK CorporateGovernance Code in full except other than as described below:
● Simon Clarke is not regarded as an independent non-executive director within the meaning of theUK Corporate Governance Code given that he represents the interests of a significant shareholderblock. However, this is mitigated because there is sufficient independent representation on theBoard. In addition, the Board believes that his position provides a strong interest in challenging andscrutinising management to secure excellent performance. Simon Clarke has been subjected to amore rigorous review as he has served on the Board for more than seven years from the date of hisfirst election to the Board.
● Although Simon Clarke was a member of the committees during the period, there continued to besufficient independent non-executive directors across all committees consistent with requirements ofthe UK Corporate Governance Code.
With effect from 23 April 2012, Simon Clarke resigned as a member of both the Audit and RemunerationCommittees and stood down as a member of the Nomination Committee with effect from 25 June 2012.He continues to attend meetings of those committees as an observer. Accordingly, as of the date of thisProspectus, St. Modwen is in compliance with the principal corporate governance rules applicable to it.
Principal subsidiariesDetails of the Issuer’s principal subsidiaries as of the date of this Prospectus are set out in the table below.The Issuer is dependent upon its principal subsidiaries for its income (principally from the repayment ofintra-group debt provided by St. Modwen to such subsidiaries).
Proportion of ordinary shares
Name Country of incorporation held (per cent.) Nature of principal business5555555555555555 5555555 55555 55555555
Redman Heenan Properties Limited .......... England and Wales 100 Property investorsSt. Modwen Developments Limited ........... England and Wales 100 Property developersSt. Modwen Ventures Limited ................... England and Wales 100 Property investorsSt. Modwen Properties Sàrl........................ Luxembourg 100 Property investorsStoke-On-Trent Regeneration Limited....... England and Wales 81 Property developersVSM Estates (Holdings) Limited ............... England and Wales 50 Property developers
Major shareholdersAs of the last practicable date prior to the date of this Prospectus, so far as is known to the Issuer by virtueof notifications made to it pursuant to the Financial Services Authority’s Disclosure and TransparencyRules, the persons who are, directly or indirectly, interested in three per cent. or more of the Issuer’s votingrights are as follows:
Voting Percentagerights interest
5555 5555
Lady Clarke and family holdings (excluding S.W. Clarke) ............................ 19,962,539 9.96J.D. Leavesley and connected parties ............................................................. 18,263,382 9.12BlackRock, Inc. .............................................................................................. 10,024,759 5.00TR Property Investment Trust PLC............................................................... 6,802,638 3.40
None of those persons identified above have voting rights that differ from the voting rights of othermembers of the Issuer.
So far as it is aware, St. Modwen is not directly or indirectly controlled or owned by any person.
Share capitalSt. Modwen has in issue 200,360,931 ordinary shares of 10 pence each, each of which are fully paid. Thereis no limit on St. Modwen’s authorised share capital.
Objects and purposesThe Issuer’s objects and purposes are unrestricted.
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TERMS AND CONDITIONS OF THE BONDS
The following are the terms and conditions substantially in the form in which they will be endorsed on theBonds in definitive form (if issued):
The issue of the Sterling denominated 6.25 per cent. Bonds due 2019 (the “Bonds”) was authorised by aresolution of the board of Directors of St. Modwen Properties PLC (the “Issuer”) passed on 24 September2012 and a committee of the board of Directors of the Issuer passed on 16 October 2012. The Bonds areconstituted by a Trust Deed (the “Trust Deed”) dated 7 November 2012 (the “Issue Date”) between theIssuer and U.S. Bank Trustees Limited (the “Trustee”, which expression shall include all persons for thetime being the trustee or trustees under the Trust Deed) as trustee for the holders of the Bonds (the“Bondholders”). These terms and conditions (the “Conditions”) include summaries of, and are subject to,the detailed provisions of the Trust Deed, which includes the form of the Bonds and the coupons relatingto them (the “Coupons”). Copies of the Trust Deed and of the Paying Agency Agreement (the “PayingAgency Agreement”) dated on or around the Issue Date relating to the Bonds between the Issuer, theTrustee and the initial principal paying agent and agents named in it, are available for inspection duringusual business hours at the principal office of the Trustee (presently at Fifth Floor, 125 Old Broad Street,London EC2N 1AR) and at the specified offices of the principal paying agent for the time being (the“Principal Paying Agent”) and the other paying agents for the time being (the “Paying Agents”, whichexpression shall include the Principal Paying Agent). The Bondholders and the holders of the Coupons(whether or not attached to the relevant Bonds) (the “Couponholders”) are entitled to the benefit of, arebound by, and are deemed to have notice of, all the provisions of the Trust Deed and are deemed to havenotice of those provisions applicable to them of the Paying Agency Agreement.
1. Form, Denomination and Title
(a) Form and denomination: The Bonds are serially numbered and in bearer form in the denominationof £100 each, with Coupons attached on issue.
(b) Title: Title to the Bonds and the Coupons passes by delivery. The holder of any Bond or Couponwill (except as otherwise required by law) be treated as its absolute owner for all purposes (whetheror not it is overdue and regardless of any notice of ownership, trust or any interest in it, any writingon it, or its theft or loss) and no person will be liable for so treating the holder.
2. Status
The Bonds and the Coupons constitute direct, unconditional and (subject to Condition 3(a)) unsecuredobligations of the Issuer and shall at all times rank pari passu and without any preference amongthemselves. The payment obligations of the Issuer under the Bonds and the Coupons shall, save for suchexceptions as may be provided by applicable legislation and subject to Condition 3(a), at all times rank atleast equally with all its other present and future unsecured and unsubordinated obligations.
3. Covenants
(a) Negative Pledge: So long as any Bond or Coupon remains outstanding (as defined in the TrustDeed), the Issuer will not, and it will ensure that none of its Subsidiaries will, create or haveoutstanding any mortgage, charge, lien, pledge or other security interest, upon the whole or anypart of its present or future undertaking, assets or revenues (including any uncalled capital) tosecure any Relevant Indebtedness or to secure any guarantee or indemnity in respect of anyRelevant Indebtedness, without at the same time or prior thereto according to the Bonds and theCoupons the same security as is created or subsisting to secure any such Relevant Indebtedness,guarantee or indemnity or such other security as either: (i) the Trustee shall in its absolute discretiondeem not materially less beneficial to the interests of the Bondholders; or (ii) shall be approved byan Extraordinary Resolution (as defined in the Trust Deed) of the Bondholders.
(b) Financial Covenants: So long as any Bond remains outstanding (as defined in the Trust Deed), theIssuer shall ensure that:
(i) as at any LTV Reporting Date, See-through Net Debt does not exceed 75 per cent. ofSee-through Property Portfolio; and
(ii) as at and for the 12 month period ending on each Interest Coverage Ratio Reporting Date,the ratio of Net See-through Operating Income to Net See-through Financing Costs will beat least 1.5.
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(c) Financial Information: (i) Within four months of its most recent financial year-end, the Issuer shallsend to the Trustee a copy of its audited annual consolidated financial statements for such financialyear, together with the report thereon of the Issuer’s independent auditors; and (ii) within twomonths of the end of the first half of each financial year, the Issuer shall send to the Trustee a copyof its semi-annual consolidated financial statements as at, and for the period ending on, the end ofsuch period.
(d) Compliance Certificate: The Issuer shall, concurrently with the delivery of each of the annual andinterim consolidated financial statements referred to in Condition 3(c), provide to the Trustee acertificate signed by two Directors of the Issuer confirming compliance with each of the covenantscontained in Condition 3(b) as at the most recent LTV Reporting Date and the most recent InterestCoverage Ratio Reporting Date, as the case may be, upon which certificate the Trustee may relyabsolutely without any liability to any person for so doing.
(e) Calculation Adjustment: In the event that IFRS changes from IFRS applicable as at the Issue Date,“See-through Net Debt”, “See-through Property Portfolio”, “Net See-through Operating Income”and “Net See-through Financing Costs” shall (for the purposes of the calculations in Condition 3(b)above) be adjusted so that the relevant amounts are determined on the same basis as if IFRS as atthe Issue Date were still applicable. So long as any Bond remains outstanding, the Issuer shallprepare and publish, in its Consolidated Financial Statements, the breakdown of “Net Debt”,“Property portfolios” and “Trading profit”, each on a consistent basis with those respective itemsappearing under ‘Non Statutory Information’ in the notes to the Issuer’s annual consolidatedfinancial statements for the period ended 30 November 2011.
(f) Definitions:
In these Conditions:
“Consolidated Financial Statements” means the Issuer’s audited annual consolidated financialstatements or its unaudited half-year consolidated financial statements, as the case may be,including the relevant accounting policies and notes to the accounts and in each case prepared inaccordance with IFRS from time to time (and if there has been a change in accounting practicessince the Issue Date, it shall be accompanied by a description of any change necessary for“See-through Net Debt”, “See-through Property Portfolio”, “Net See-through Operating Income”and “Net See-through Financing Costs” to reflect the same under IFRS as at the Issue Date);
“Group” has the meaning used in the Issuer’s Consolidated Financial Statements;
“IFRS” means the generally accepted accounting practice and principles applicable to the businessthe Issuer conducts, currently International Financial Reporting Standards;
“Interest Coverage Ratio Reporting Date” means 30 November in each year or such other date as atwhich the Issuer prepares its audited annual consolidated financial statements;
“Joint Ventures” means joint ventures and associates as the term is used in the Issuer’s ConsolidatedFinancial Statements;
“LTV Reporting Date” means such annual or semi annual date or dates as at which the Issuerprepares its audited annual consolidated financial statements or unaudited half-year consolidatedfinancial statements, as the case may be, and as at the Issue Date the annual and semi annual LTVReporting Dates are 30 November and 31 May respectively;
“Net See-through Financing Costs” means, for any period, the “Finance costs” less “Financeincome” for the Group and Joint Ventures on a see-through basis (excluding, for the avoidance ofdoubt, mark-to-market valuations of derivative financial instruments and other non-cash items), asshown in the Consolidated Financial Statements for such period;
“Relevant Indebtedness” means any indebtedness which is in the form of, or represented orevidenced by, bonds, notes, debentures, loan stock or other securities in each case which for thetime being are, or are intended to be (with the agreement of the issuer thereof), quoted, listed ordealt in or traded on any stock exchange or over-the-counter or other securities market;
“See-through Net Debt” means, on any LTV Reporting Date, total “Borrowings” (which, for theavoidance of doubt, includes any Borrowings that are current liabilities and any Borrowings thatare non-current liabilities) less “Cash and cash equivalents”, in each case on a consolidated basis,plus “Net Debt” of Joint Ventures, in each case as shown in the Consolidated Financial Statements
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for that LTV Reporting Date (for the avoidance of doubt, See-through Net Debt is net of “Cashand cash equivalents” and does not include mark-to-market valuations of derivative financialinstruments nor does it include finance leases but it does include the Issuer’s share of “Net Debt” ofJoint Ventures);
“Net See-through Operating Income” means, for any period, “Net rental income” plus“Development profit” plus “Gains on disposal of investments/investment properties” plus “Otherincome” for the Group and for Joint Ventures as shown in the Consolidated Financial Statementsfor such period;
“See-through Property Portfolio” means, on any LTV Reporting Date, “Investment properties(adjusted for non-property elements of investment properties)” plus “Inventories” less “pre-soldproperties in the course of construction”, in each case as shown in the Consolidated FinancialStatements for that LTV Reporting Date (for the avoidance of doubt, this includes the Issuer’sshare of property portfolio in Joint Ventures); and
“Subsidiary” means a subsidiary within the meaning of Section 1159 of the Companies Act 2006.
4. Interest
The Bonds bear interest from and including the Issue Date at the rate of 6.25 per cent. per annum, payablesemi-annually in arrear in equal instalments of £3.125 per £100 in principal amount of Bonds on 7 Mayand 7 November in each year (each an “Interest Payment Date”) commencing on 7 May 2013. Each Bondwill cease to bear interest from the due date for redemption unless, upon due presentation, payment ofprincipal is improperly withheld or refused. In such event it shall continue to bear interest at such rate(both before and after judgment) until whichever is the earlier of: (a) the day on which all sums due inrespect of such Bond up to that day are received by or on behalf of the relevant holder; and (b) the dayseven days after the Trustee or the Principal Paying Agent has notified Bondholders of receipt of all sumsdue in respect of all the Bonds up to that seventh day (except to the extent that there is failure in thesubsequent payment to the relevant holders under these Conditions).
If interest is to be calculated in respect of a period which is equal to or shorter than an Interest Period (asdefined below), the day-count fraction used will be the number of days in the relevant period, from andincluding the date from which interest begins to accrue to but excluding the date on which it falls due,divided by the product of: (1) the number of days in the Interest Period in which the relevant period falls(including the first such day but excluding the last); and (2) the number of Interest Periods normallyending in any year. The period beginning on and including the Issue Date and ending on but excluding thefirst Interest Payment Date and each successive period beginning on and including an Interest PaymentDate and ending on but excluding the next succeeding Interest Payment Date is called an “InterestPeriod”.
Interest in respect of any Bond shall be calculated per £100 in principal amount of the Bonds. The amountof interest payable per £100 for any period shall, save as provided above in relation to equal instalments,be equal to the product of 6.25 per cent., £100 and the day-count fraction for the relevant period, roundingthe resulting figure to the nearest penny (half a penny being rounded upwards).
5. Redemption and Purchase
(a) Final redemption: Unless previously redeemed or purchased and cancelled, the Bonds will beredeemed at their principal amount on 7 November 2019 (the “Maturity Date”). The Bonds maynot be redeemed at the option of the Issuer other than in accordance with this Condition 5.
(b) Redemption for taxation reasons: All the Bonds (but not part only) may be redeemed at the optionof the Issuer at any time, on giving not less than 30 nor more than 60 days’ irrevocable notice to theBondholders in accordance with Condition 15, at their principal amount, (together with interestaccrued to but excluding the date fixed for redemption), if: (i) the Issuer satisfies the Trusteeimmediately prior to the giving of such notice that it has or will become obliged to pay additionalamounts as provided or referred to in Condition 7 as a result of any change in, or amendment to,the laws or regulations of the United Kingdom, any political subdivision or any authority thereofor therein having power to tax, or any change in the application or official interpretation of suchlaws or regulations, which change or amendment becomes effective on or after the Issue Date; and(ii) such obligation cannot be avoided by the Issuer taking reasonable measures available to it,provided that no such notice of redemption shall be given earlier than 90 days prior to the earliestdate on which the Issuer would be obliged to pay such additional amounts were a payment in
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respect of the Bonds then due. Prior to the publication of any notice of redemption pursuant to thisCondition 5(b), the Issuer shall deliver to the Trustee: (1) a certificate signed by two Directors of theIssuer stating that the obligation referred to in (i) above has arisen or will arise and cannot beavoided by the Issuer taking reasonable measures available to it and the Trustee shall be entitled toaccept such certificate as sufficient evidence of the satisfaction of the condition precedent set out in(i) and (ii) above, in which event it shall be conclusive and binding on the Bondholders and theCouponholders; and (2) an opinion of independent legal advisers of recognised standing to theeffect that the Issuer has or will become obliged to pay such additional amounts as a result of suchchange or amendment.
(c) Other redemptions at the option of the Issuer: The Issuer may at any time, having given not less than30 nor more than 60 days’ irrevocable notice to the Bondholders in accordance with Condition 15(which notice shall specify the date fixed for redemption (the “Optional Redemption Date”)) redeemor purchase or procure that any of its Subsidiaries shall purchase, all (but not part only) of theBonds for the time being outstanding at any time at the Redemption Price (as defined below)together with interest accrued to (but excluding) the Optional Redemption Date.
The “Redemption Price” shall be the higher of: (i) the principal amount outstanding of the Bonds;and (ii) the principal amount outstanding of the Bonds multiplied by the price (expressed as apercentage in relation to the principal amount outstanding of the Bonds) (as reported in writing tothe Issuer and the Trustee by an independent financial adviser appointed by the Issuer andapproved by the Trustee) at which the Gross Redemption Yield (if the Bonds were to remainoutstanding to their original maturity) on the Bonds on the Calculation Date is equal to the GrossRedemption Yield at 11.00 a.m. (London time) on the Calculation Date of 3.75 per cent. UnitedKingdom Government Treasury Stock due 2019 (or, where such financial adviser advises the Issuerand the Trustee that, for reasons of illiquidity or otherwise, such stock is not appropriate for suchpurpose, such other government stock as such financial adviser may recommend for such purposes)plus 0.5 per cent. For such purposes, “Calculation Date” means the date which is the secondbusiness day in London prior to the Optional Redemption Date and “Gross Redemption Yield”means, with respect to a security, the gross redemption yield on such security (as calculated by thefinancial adviser on the basis set out in the United Kingdom Debt Management Office in the paper“Formulae for Calculating Gilt Prices from Yields” page 5, Section One: Price/Yield Formulae“Conventional Gilts; Double-dated and Undated Gilts with Assumed (or Actual) Redemption on aQuasi-Coupon Date” (published on 8 June 1998 and updated on 15 January 2002 and 16 March2005 and as further updated or amended) on a semi-annual compounding basis (converted on anannualised yield and rounded up (if necessary) to four decimal places)).
Any notice given pursuant to this Condition 5(c) shall be irrevocable and shall specify the OptionalRedemption Date. Upon the expiry of any such notice, the Issuer shall be bound to redeem or, asthe case may be, purchase or procure the purchase of (and the Bondholders shall be bound to sell)the Bonds at the applicable Redemption Price on the Optional Redemption Date together withaccrued interest as aforesaid unless previously redeemed or purchased. The Trustee shall relyabsolutely and without further enquiry on the advice of any financial adviser appointed as providedin this Condition 5(c) and shall not be liable to any person for so doing.
(d) Redemption at the option of the Bondholders upon a Change of Control Event:
If while any of the Bonds remains outstanding a Change of Control Event occurs (unless the Issuerhas given notice under Condition 5(b) or 5(c)):
(i) the Issuer shall promptly following the occurrence of the Change of Control Event and inany case not later than 10 days thereafter give notice (a “Change of Control Event Notice”) tothe Bondholders in accordance with Condition 15 and the Trustee specifying the nature ofthe Change of Control Event and the procedure for exercising the option contained in thisCondition 5(d); and
(ii) the holder of each Bond will have the option to require the Issuer to redeem or, at the Issuer’soption, purchase (or procure the purchase of) that Bond on the Put Date (as defined below)at its principal amount, together with any interest accrued up to (but excluding) thePut Date.
Such option may be exercised by the holder delivering its Bond(s) during business hours of therelevant Paying Agent on any business day falling within the period (the “Put Period”) of 45 daysafter a Change of Control Event Notice is given, at the specified office of any Paying Agent,
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accompanied by a duly signed and completed notice of exercise in the form (for the time beingcurrent) obtainable from the specified office of any Paying Agent (a “Put Notice”). The Bondshould be delivered together with all Coupons appertaining thereto maturing after the Put Date,failing which the Paying Agent will require payment from or on behalf of the Bondholder of anamount equal to the face value of any such missing Coupon. Any amount so paid will bereimbursed by the Paying Agent to the Bondholder against presentation and surrender of therelevant missing Coupon (or any replacement therefor issued pursuant to Condition 10) at any timeafter such payment but before the expiry of 10 years from the date on which such Coupon wouldhave become due, but not thereafter. The Paying Agent to which such Bond and Change of ControlEvent Notice are delivered will issue to the Bondholder concerned a non-transferable receipt inrespect of the Bond so delivered.
Payment in respect of any Bond so delivered will be made, if the holder duly specified a bankaccount (in the currency of the Bonds) in the Put Notice to which payment is to be made, on the PutDate by transfer to that bank account and, in every other case, on or after the Put Date againstpresentation and surrender or (as the case may be) endorsement of such receipt of the Bond at thespecified office of any Paying Agent. A Put Notice, once given, shall be irrevocable. For thepurposes of these Conditions, receipts issued pursuant to this Condition 5(d) shall be treated as ifthey were Bonds. The Issuer shall redeem or, at the option of the Issuer, purchase (or procure thepurchase of) the relevant Bonds on the Put Date at their principal amount, together with anyinterest accrued up to (but excluding) the Put Date unless previously redeemed or purchased.
If 80 per cent. or more in principal amount of the Bonds originally issued have been redeemed orpurchased pursuant to the foregoing provisions of this Condition 5(d), the Issuer may, on not lessthan 30 nor more than 60 days’ notice to the Bondholders (which notice shall be irrevocable) givenwithin 30 days after the Put Date redeem or, at the option of the Issuer, purchase (or procure thepurchase of) all but not some only of the remaining outstanding Bonds at a redemption price equalto the principal amount thereof plus interest accrued to but excluding the date of such redemptionor purchase.
For the purpose of this Condition 5(d):
A “Change of Control Event” shall occur if any person or any persons acting in concert (as definedin the City Code on Takeovers and Mergers), or any person(s) acting on behalf of such person(s),other than a Holding Company whose shareholders are or are to be substantially similar to thepre-existing shareholders of the Issuer or any direct or indirect Holding Company of the Issuer,shall become interested (within the meaning of Part 22 of the Companies Act 2006) in:
(i) more than 50 per cent. of the issued or allotted ordinary share capital of the Issuer; or
(ii) shares in the capital of the Issuer carrying more than 50 per cent. of the voting rightsnormally exercisable at a general meeting of the Issuer; or
(iii) more than 50 per cent. of the issued or allotted ordinary share capital of any direct or indirectHolding Company of the Issuer; or
(iv) shares in the capital of any direct or indirect Holding Company of the Issuer carrying morethan 50 per cent. of the voting rights normally exercisable at a general meeting of the director indirect Holding Company of the Issuer;
“Holding Company” means a holding company within the meaning of Section 1159 of theCompanies Act 2006; and
“Put Date” means the day which is 10 days after the expiration of the Put Period provided that suchday is a day (other than a Saturday or Sunday) on which banks are open generally for business inLondon, or, if not, the next such day.
The Trustee is under no obligation to ascertain whether a Change of Control Event or any eventwhich could lead to the occurrence of or could constitute a Change of Control Event has occurred,and until it shall have actual knowledge or notice pursuant to the Trust Deed to the contrary, theTrustee may assume that no Change of Control Event or other such event has occurred.
(e) Notice of redemption: All Bonds in respect of which any notice of redemption is given under thisCondition 5 shall be redeemed on the date specified in such notice in accordance with thisCondition 5.
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(f) Purchase: The Issuer and its Subsidiaries may at any time purchase the Bonds in the open marketor otherwise at any price (provided that they are purchased together with all unmatured Couponsrelating to them). The Bonds so purchased, while held by or on behalf of the Issuer or any suchSubsidiary, shall not entitle the holder to vote at any meetings of the Bondholders and shall not bedeemed to be outstanding for the purposes of calculating quorums at meetings of the Bondholdersor for the purposes of Condition 11.
6. Payments
(a) Method of Payment: Payments of principal and interest will be made against presentation andsurrender (or, in the case of a partial payment, endorsement) of Bonds or the appropriate Coupons(as the case may be) at the specified office of any Paying Agent by sterling cheque drawn on, or bytransfer to a sterling account maintained by the payee with, a bank in the United Kingdom.Payments of interest due in respect of any Bond other than on either presentation and surrender orendorsement (as appropriate) of matured Coupons shall be made only against presentation andsurrender of the relevant Bond.
(b) Payments subject to laws: All payments are subject in all cases to any applicable fiscal or other lawsand regulations in the place of payment, but without prejudice to the provisions of Condition 7. Nocommissions or expenses shall be charged to the Bondholders or Couponholders in respect of suchpayments.
(c) Surrender of unmatured Coupons: Each Bond should be presented for redemption together with allunmatured Coupons relating to it, failing which the amount of any such missing unmaturedCoupon (or, in the case of payment not being made in full, that proportion of the amount of suchmissing unmatured Coupon which the sum of principal so paid bears to the total principal amountdue) will be deducted from the sum due for payment. Each amount of principal so deducted will bepaid in the manner mentioned above against surrender of the relevant missing Coupon not laterthan 10 years after the Relevant Date (as defined in Condition 7) for the relevant payment ofprincipal.
(d) Payments on business days: A Bond or Coupon may only be presented for payment on a day whichis a business day in the place of presentation (and, in the case of payment by transfer to a sterlingaccount, in London). No further interest or other payment will be made as a consequence of the dayon which the relevant Bond or Coupon may be presented for payment under this Condition 6falling after the due date. In this Condition, “business day” means a day on which commercial banksand foreign exchange markets are open for business in the relevant city.
(e) Paying Agents: The initial Paying Agents and their initial specified offices are listed below. TheIssuer reserves the right at any time with the approval of the Trustee to vary or terminate theappointment of any Paying Agent and appoint additional or other Paying Agents, provided that itwill maintain: (i) a Principal Paying Agent; (ii) a Paying Agent having its specified office in Londonand/or any other major European city approved by the Trustee; (iii) a Paying Agent with a specifiedoffice in a European Union member state that will not be obliged to withhold or deduct taxpursuant to European Council Directive 2003/48/EC or any other Directive implementing theconclusions of the ECOFIN Council meeting of 26-27 November 2000 on the taxation of savingsincome or any law implementing or complying with, or introduced in order to conform to, suchDirective; and (iv) a Paying Agent in a European Union member state other than the UnitedKingdom if and when applicable law in the United Kingdom requires a withholding or deductionfor or on account of any Taxes (as defined below). Notice of any change in the Paying Agents ortheir specified offices will promptly be given to the Bondholders in accordance with Condition 15.
7. Taxation
All payments of principal and interest by or on behalf of the Issuer in respect of the Bonds and theCoupons shall be made free and clear of, and without withholding or deduction for, any taxes, duties,assessments or governmental charges of whatever nature (the “Taxes”) imposed, levied, collected, withheldor assessed by or within the United Kingdom or any political subdivision or any authority therein orthereof having power to tax, unless such withholding or deduction is required by law. In that event theIssuer shall pay such additional amounts as will result in receipt by the Bondholders and/or theCouponholders of such amounts as would have been received by them had no such withholding ordeduction been required, except that no such additional amounts shall be payable in respect of any Bondor Coupon presented for payment:
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(a) Other connection: by or on behalf of a holder who is liable to such taxes, duties, assessments orgovernmental charges in respect of such Bond or Coupon by reason of his having some connectionwith the United Kingdom other than the mere holding of the Bond or Coupon; or
(b) Presentation more than 30 days after the Relevant Date: more than 30 days after the Relevant Dateexcept to the extent that the holder of it would have been entitled to such additional amounts onpresenting such Bond or Coupon for payment on the last day of such period of 30 days; or
(c) Payment to individuals: where such withholding or deduction is imposed on a payment to anindividual and is required to be made pursuant to European Council Directive 2003/48/EC or anyother Directive implementing the conclusions of the ECOFIN Council meeting of 26-27 November2000 on the taxation of savings income or any law implementing or complying with, or introducedin order to conform to, such Directive; or
(d) Payment by another Paying Agent: by or on behalf of a Bondholder or a Couponholder who wouldhave been able to avoid such withholding or deduction by presenting the relevant Bond or Couponto another Paying Agent in a Member State of the European Union.
“Relevant Date” means whichever is the later of: (i) the date on which such payment first becomes due; and(ii) if the full amount payable has not been received by the Principal Paying Agent or the Trustee on orprior to such due date, the date on which, the full amount having been so received, notice to that effectshall have been given to the Bondholders. Any reference in these Conditions to “principal” and/or“interest” shall be deemed to include any additional amounts which may be payable under thisCondition 7 or any undertaking given in addition to or substitution for it under the Trust Deed.
8. Events of Default
If any of the following events occurs the Trustee at its discretion may, and if so requested by holders of atleast one-fifth in principal amount of the Bonds then outstanding or if so directed by an ExtraordinaryResolution shall, subject in each case to being indemnified and/or secured and/or prefunded to itssatisfaction, give notice to the Issuer that the Bonds are, and they shall immediately become, due andpayable at their principal amount together (if applicable) with accrued interest:
(a) Non-Payment: the Issuer fails to pay any interest on any of the Bonds when due and such failurecontinues for a period of fourteen days; or
(b) Breach of Other Obligations: the Issuer does not perform or comply with any one or more of itsother obligations in the Bonds or the Trust Deed and, except where such default is, in the opinionof the Trustee, incapable of remedy, such default continues for 30 days after notice thereof shallhave been given to the Issuer by the Trustee; or
(c) Cross-Default: (i) any other present or future indebtedness of the Issuer or any of its PrincipalSubsidiaries for or in respect of moneys borrowed or raised becomes due and payable prior to itsstated maturity by reason of any actual or potential default, event of default or the like (howsoeverdescribed); or (ii) any such indebtedness is not paid when due or, as the case may be, within anyoriginally applicable grace period; or (iii) the Issuer or any of its Principal Subsidiaries fails to paywhen due any amount payable by it under any present or future guarantee for, or indemnity inrespect of, any moneys borrowed or raised provided that the aggregate amount of the relevantindebtedness, guarantees and indemnities in respect of which one or more of the events mentionedabove in this Condition 8(c) have occurred equals or exceeds £10,000,000 or its equivalent; or
(d) Enforcement Proceedings: a distress, attachment, execution or other legal process is levied, enforcedor sued out on or against any material part (in the opinion of the Trustee) of the property, assets orrevenues of the Issuer or any of its Principal Subsidiaries and is not discharged or stayed within30 days; or
(e) Security Enforced: any mortgage, charge, pledge, lien or other encumbrance, present or future,created or assumed by the Issuer or any of its Principal Subsidiaries over all or any material part ofthe assets of the Issuer or any of its Principal Subsidiaries becomes enforceable and any step is takento enforce it (including the taking of possession or the appointment of a receiver, administrativereceiver, administrator manager or other similar person in relation to all or any material part of theassets of the Issuer or any of its Principal Subsidiaries) and is not discharged or stayed within30 days; or
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(f) Insolvency: the Issuer or any of its Principal Subsidiaries is (or could be deemed by law or a courtto be) insolvent or bankrupt or unable to pay all or a material part of (or a particular type of) itsdebts, stops, suspends or threatens to stop or suspend payment of all or a material part of (or aparticular type of) its debts, proposes or makes any agreement for the deferral, rescheduling orother readjustment of all or a particular type of its debts (or of any part which it will or mightotherwise be unable to pay when due), proposes or makes a general assignment or an arrangementor composition with or for the benefit of the relevant creditors in respect of any of such debts or amoratorium is agreed or declared or comes into effect in respect of or affecting all or any part of (orof a particular type of) the debts of the Issuer or any of its Principal Subsidiaries provided that ineach case above the references to “a particular type” of debt shall not include any debt less than£1,000,000 or its equivalent; or
(g) Winding-up: an administrator is appointed, an order is made or an effective resolution passed forthe winding-up or dissolution or administration of the Issuer or any of its Subsidiaries, or the Issuerceases or threatens to cease to carry on all or substantially all of its business or operations, except:(A) for the purpose of and followed by a reconstruction, amalgamation, reorganisation, merger orconsolidation (i) on terms approved by the Trustee or by an Extraordinary Resolution of theBondholders, or (ii) in the case of a Principal Subsidiary, whereby the undertaking and assets of thePrincipal Subsidiary are transferred to or otherwise vested in the Issuer or another of itsSubsidiaries; or (B) in the case of Principal Subsidiaries only, for the purpose of a bona fide disposalfor full value on an arm’s length basis of all or substantially all of the business or operations(including the disposal of shares in a Principal Subsidiary) of a Principal Subsidiary; or
(h) Analogous Events: any event occurs which under the laws of any relevant jurisdiction has ananalogous effect to any of the events referred to in any of the foregoing paragraphs of thisCondition 8,
provided that in the case of any event as is specified in any of paragraphs (b), (d), (f) (in relation to aPrincipal Subsidiary only) and (g) (in relation to a Principal Subsidiary only) and (h) (insofar as it relatesto any of the events mentioned in relation to paragraphs (b), (d), (f) (in relation to a Principal Subsidiaryonly) and (g) (in relation to a Principal Subsidiary only)) the Trustee shall have certified that in its opinionsuch event is materially prejudicial to the interests of the Bondholders.
In this Condition 8, “Principal Subsidiary” means:
(i) any Subsidiary of the Issuer whose:
(1) “Total Assets”, being the aggregate of “non-current assets” and “current assets”, as shown inits most recent audited annual accounts or, where a Subsidiary is not otherwise required toproduce audited annual accounts, the latest finalised annual accounts of such Subsidiary,whether audited or not and whether published or not (the “Relevant Accounts”), andconsolidated in the case of a Subsidiary which ordinarily produces consolidated accounts,exceeds five per cent. of the consolidated Total Assets of the Group as shown in the Issuer’saudited consolidated annual accounts; or
(2) “Operating Income”, being the aggregate of “net rental income”, “development profit”,“gains on disposal of investments/investment properties” and “other income” as shown in theRelevant Accounts, and consolidated in the case of a Subsidiary which ordinarily producesconsolidated accounts, exceeds five per cent. of the consolidated “Operating Income” of theGroup as shown in the Issuer’s audited consolidated annual accounts,
provided that in the case of a Subsidiary acquired after the end of the financial period to which thethen latest audited consolidated annual accounts of the Issuer relate, for the purpose of applyingeach of the foregoing tests, the reference to the Issuer’s latest audited consolidated annual accountsshall, until consolidated annual accounts for the financial period in which the acquisition is madehave been published, be deemed to be a reference to such annual accounts as if such Subsidiary hadbeen shown therein by reference to its then latest relevant audited annual accounts (or if applicable,the Relevant Accounts), adjusted as deemed appropriate by the Issuer; and
(ii) any Subsidiary of the Issuer to which is transferred all or substantially all of the assets andundertaking of another Subsidiary which immediately prior to such transfer is a PrincipalSubsidiary, whereupon: (A) the transferor shall immediately cease to be a Principal Subsidiary; and(B) the transferee shall immediately become a Principal Subsidiary, provided that on or after thedate on which the latest finalised annual accounts for the financial period current at the date of such
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transfer are published or finalised, whether the transferor or the transferee is or is not a PrincipalSubsidiary shall be determined pursuant to the provisions of sub-paragraph (i) above.
A certificate addressed to the Trustee by two directors of the Issuer stating that in their opinion aSubsidiary is or is not a Principal Subsidiary shall, in the absence of manifest error, be conclusive andbinding on all parties.
9. Prescription
Claims in respect of principal and interest will become void unless presentation for payment is made asrequired by Condition 6 within a period of 10 years in the case of principal and five years in the case ofinterest from the appropriate Relevant Date.
10. Replacement of Bonds and Coupons
If any Bond or Coupon is lost, stolen, mutilated, defaced or destroyed it may be replaced at the specifiedoffice of the Paying Agent in London subject to all applicable laws and stock exchange or other relevantauthority requirements, upon payment by the claimant of the expenses incurred in connection with suchreplacement and on such terms as to evidence, security, indemnity and otherwise as the Issuer mayreasonably require. Mutilated or defaced Bonds or Coupons must be surrendered before replacements willbe issued.
11. Meetings of Bondholders, Modification, Waiver and Substitution
(a) Meetings of Bondholders: The Trust Deed contains provisions for convening meetings ofBondholders to consider matters affecting their interests, including the sanctioning byExtraordinary Resolution of a modification of any of these Conditions or any provision of theTrust Deed or the Paying Agency Agreement. Such a meeting may be convened by Bondholdersholding not less than 10 per cent. in principal amount of the Bonds for the time being outstanding.The quorum for any meeting convened to consider an Extraordinary Resolution will be two ormore persons holding or representing a clear majority in principal amount of the Bonds for the timebeing outstanding, or at any adjourned meeting two or more persons being or representingBondholders whatever the principal amount of the Bonds held or represented, unless the business ofsuch meeting includes consideration of proposals, inter alia: (i) to modify the maturity of the Bondsor the dates on which interest is payable in respect of the Bonds; (ii) to reduce or cancel theprincipal amount of, or interest on, the Bonds; (iii) to change the currency of payment of the Bondsor the Coupons; or (iv) to modify the provisions concerning the quorum required at any meeting ofBondholders or the majority required to pass an Extraordinary Resolution, in which case thenecessary quorum will be two or more persons holding or representing not less than 75 per cent., orat any adjourned meeting not less than 25 per cent., in principal amount of the Bonds for the timebeing outstanding. Any Extraordinary Resolution duly passed shall be binding on all Bondholders(whether or not they were present at any meeting at which such resolution was passed) and on allCouponholders.
The Trust Deed provides that a resolution in writing signed by or on behalf of the holders of notless than 90 per cent. in principal amount of the Bonds outstanding shall for all purposes be as validand effective as an Extraordinary Resolution passed at a meeting of Bondholders duly convenedand held. Such a resolution in writing may be contained in one document or several documents inthe same form, each signed by or on behalf of one or more Bondholders.
(b) Modification and Waiver: The Trustee may agree, without the consent of the Bondholders orCouponholders, to: (i) any modification of any of the provisions of the Trust Deed that is, in theopinion of the Trustee, of a formal, minor or technical nature or is made to correct a manifest error;and (ii) any other modification (except as mentioned in the Trust Deed), and any waiver orauthorisation of any breach or proposed breach, of any of the provisions of the Trust Deed that isin the opinion of the Trustee not materially prejudicial to the interests of the Bondholders. Any suchmodification, authorisation or waiver shall be binding on all the Bondholders and theCouponholders and, if the Trustee so requires, such modification shall be notified to theBondholders as soon as practicable.
(c) Substitution: The Trust Deed contains provisions permitting the Trustee to agree, subject to suchamendment of the Trust Deed and such other conditions as the Trustee may require, but withoutthe consent of the Bondholders or the Couponholders, to the substitution of certain other entities in
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place of the Issuer, or of any previous substituted company, as principal debtor under the TrustDeed and the Bonds. In the case of such a substitution the Trustee may agree, without the consentof the Bondholders or Couponholders, to a change of the law governing the Bonds, the Couponsand/or the Trust Deed provided that such change would not in the opinion of the Trustee bematerially prejudicial to the interests of the Bondholders.
(d) Entitlement of the Trustee: In connection with the exercise of its functions (including but not limited tothose referred to in this Condition 11) the Trustee shall have regard to the interests of the Bondholdersas a class and shall not have regard to the consequences of such exercise for individual Bondholdersor Couponholders and the Trustee shall not be entitled to require, nor shall any Bondholder orCouponholder be entitled to claim, from the Issuer any indemnification or payment in respect of anytax consequence of any such exercise upon individual Bondholders or Couponholders.
12. Enforcement
The Trustee may, at its discretion and without further notice, take such steps or actions or institute suchproceedings against the Issuer as it may think fit to enforce the terms of the Trust Deed, the Bonds and theCoupons, but it need not take any such steps or actions or institute such proceedings unless: (a) it shallhave been so directed by an Extraordinary Resolution or so requested in writing by Bondholders holdingat least one-fifth in principal amount of the Bonds outstanding; and (b) it shall have been indemnifiedand/or secured and/or prefunded to its satisfaction. No Bondholder or Couponholder may proceeddirectly against the Issuer unless the Trustee, having become bound so to proceed, fails to do so within areasonable time and such failure is continuing.
13. Indemnification of the Trustee
The Trust Deed contains provisions for the indemnification of the Trustee and for its relief fromresponsibility. The Trustee is entitled to enter into business transactions with the Issuer and any entityrelated to the Issuer without accounting for any profit.
The Trustee may rely without liability to Bondholders or Couponholders on a report, confirmation,certificate or any advice of any accountants, financial advisers, financial institution or any other expert,whether or not addressed to it and whether their liability in relation thereto is limited (by its terms or byany engagement letter relating thereto entered into by the Issuer, the Trustee or any other person or in anyother manner) by reference to a monetary cap, methodology or otherwise. The Trustee may accept andshall be entitled to rely (without liability to any person for so doing) on any such report, confirmation,certificate or advice and such report, confirmation, certificate or advice shall be binding on the Issuer, theTrustee, the Bondholders and the Couponholders.
14. Further Issues
The Issuer may from time to time without the consent of the Bondholders or Couponholders create andissue further securities either having the same terms and conditions as the Bonds in all respects (or in allrespects except for the first payment of interest on them) and so that such further issue shall beconsolidated and form a single series with the outstanding securities of any series (including the Bonds) orupon such terms as the Issuer may determine at the time of their issue. References in these Conditions tothe Bonds include (unless the context requires otherwise) any other securities issued pursuant to thisCondition 14 and forming a single series with the Bonds. Any further securities forming a single series withthe outstanding securities of any series (including the Bonds) constituted by the Trust Deed or any deedsupplemental to it shall, and any other securities may (with the consent of the Trustee), be constituted bya deed supplemental to the Trust Deed. The Trust Deed contains provisions for convening a single meetingof the Bondholders and the holders of securities of other series where the Trustee so decides.
15. Notices
Notices to Bondholders will be valid if published in a leading newspaper having general circulation inLondon (which is expected to be the Financial Times) or, if in the opinion of the Trustee such publicationshall not be practicable, in an English language newspaper of general circulation in the United Kingdom.Any such notice shall be deemed to have been given on the date of such publication or, if published morethan once, on the first date on which publication is made. Couponholders will be deemed for all purposesto have notice of the contents of any notice given to the Bondholders in accordance with thisCondition 15.
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16. Contracts (Rights of Third Parties) Act 1999
No person shall have any right to enforce any term or condition of the Bonds under the Contracts (Rightsof Third Parties) Act 1999.
17. Governing Law
The Trust Deed, the Bonds and the Coupons, and any non-contractual obligations arising out of or inconnection with them, are governed by and shall be construed in accordance with English law.
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SUMMARY OF PROVISIONS RELATING TO THE BONDSWHILE IN GLOBAL FORM
The Trust Deed and the Global Bond contain provisions which apply to the Bonds while they are in globalform, some of which modify the effect of the terms and conditions of the Bonds set out in this Prospectus. Thefollowing is a summary of certain parts of those provisions.
1. Exchange
The Global Bond is exchangeable in whole but not in part (free of charge to the holder) for the DefinitiveBonds described below if the Global Bond is held on behalf of a clearing system and such clearing systemis closed for business for a continuous period of 14 days (other than by reason of holidays, statutory orotherwise) or announces an intention permanently to cease business or does in fact do so. Thereupon, theholder may give notice to the Principal Paying Agent of its intention to exchange the Global Bond forDefinitive Bonds on or after the Exchange Date (as defined below) specified in the notice.
On or after the Exchange Date (as defined below) the holder of the Global Bond may surrender the GlobalBond to or to the order of the Principal Paying Agent. In exchange for the Global Bond, the Issuer shalldeliver, or procure the delivery of, an equal aggregate principal amount of duly executed andauthenticated Definitive Bonds (having attached to them all Coupons in respect of interest which has notalready been paid on the Global Bond), security printed in accordance with any applicable legal and stockexchange requirements and in or substantially in the form set out in Schedule 1 to the Trust Deed. Onexchange of the Global Bond, the Issuer will, if the holder so requests, procure that it is cancelled andreturned to the holder together with any relevant Definitive Bonds.
“Exchange Date” means a day falling not less than 60 days after that on which the notice requiringexchange is given and on which banks are open for business in the city in which the specified office of thePrincipal Paying Agent is located and in the cities in which the relevant clearing system is located.
2. Payments
Payments of principal and interest in respect of Bonds represented by the Global Bond will be madeagainst presentation for endorsement and, if no further payment falls to be made in respect of the Bonds,surrender of the Global Bond to or to the order of the Principal Paying Agent or such other Paying Agentas shall have been notified to the Bondholders for such purpose. A record of each payment so made willbe endorsed in the appropriate schedule to the Global Bond, which endorsement will be prima facieevidence that such payment has been made in respect of the Bonds. Condition 6(e)(iii) and Condition 7(d)will apply to the Definitive Bonds only. For the purpose of any payments made in respect of the GlobalBond, Condition 6(d) shall not apply, and all such payments shall be made on a day on which commercialbanks and foreign exchange markets are open in the financial centre of the currency of the Bonds.
3. Notices
So long as the Bonds are represented by the Global Bond and the Global Bond is held on behalf of aclearing system, notices to Bondholders may be given by delivery of the relevant notice to that clearingsystem for communication by it to entitled accountholders in substitution for publication as required byCondition 15. Any such notice shall be deemed to have been given to Bondholders on the second day afterthe day on which such notice is delivered to the relevant clearing system.
4. Prescription
Claims against the Issuer in respect of principal and interest on the Bonds while the Bonds are representedby the Global Bond will become void unless it is presented for payment within a period of 10 years (in thecase of principal) and five years (in the case of interest) from the appropriate Relevant Date (as defined inCondition 7).
5. Put option
The Bondholders’ put option in Condition 5(d) may be exercised by the holder of the Global Bond, givingnotice to the Principal Paying Agent of the principal amount of Bonds in respect of which the option isexercised and presenting the Global Bond for endorsement of exercise within the time limits specified inCondition 5(d).
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6. Meetings
The holder of the Global Bond shall be treated as being two persons for the purposes of any quorumrequirements of a meeting of Bondholders and, at any such meeting, as having one vote in respect of each£100 in principal amount of Bonds at any meeting of the Bondholders.
7. Purchase and Cancellation
Cancellation of any Bond at the option of the Issuer following its purchase will be effected by reduction inthe principal amount of the Global Bond.
8. Trustee’s Powers
In considering the interests of Bondholders while the Global Bond is held on behalf of a clearing system,the Trustee may have regard to any information provided to it by such clearing system or its operator asto the identity (either individually or by category) of its accountholders with entitlements to the GlobalBond and may consider such interests as if such accountholders were the holder of the Global Bond.
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SELECTED FINANCIAL INFORMATION
The following tables set out in summary form the consolidated Group income statement, Group statementof comprehensive income, Group balance sheet and Group statement of cash flows as of and for the yearsand ended 30 November 2010 and 2011 and as of and for the six month periods ended 31 May 2011 and2012. Such information is extracted (without material adjustment) from, and is qualified by reference toand should be read in conjunction with, the audited consolidated annual financial statements of the Issuerfor the years ended 30 November 2010 and 2011 and the unaudited consolidated financial statements ofthe Issuer for the six month periods ended 31 May 2011 and 2012, each of which is incorporated byreference in this Prospectus:
Group income statement
For the year ended 30 November For the six months ended 31May555555555 555555555
2010 2011 2011 20125555 5555 5555 5555
(£ million) (£ million, unaudited)
Revenue ................................................................. 121.4 109.6 61.3 81.0Net rental income ................................................. 26.4 27.5 13.8 13.9Development profits ............................................. 12.5 20.4 8.6 15.0Gains on disposals of investments/investment properties .......................................................... 2.5 0.5 — 0.9
Investment property revaluation (losses)/gains ..... 23.2 36.2 27.3 (1.8)Other net income .................................................. 3.1 3.2 1.5 1.5Profits of joint ventures and associates (post tax) 7.4 2.9 2.4 19.2Administrative expenses........................................ (16.8) (16.6) (8.4) (8.3)Profit before interest and tax................................. 58.3 74.1 45.2 40.4Finance cost .......................................................... (24.0) (26.2) (12.0) (11.5)Finance income..................................................... 3.2 2.5 4.2 1.5Profit before tax.................................................... 37.5 50.4 37.4 30.4Taxation................................................................ 0.8 (4.9) (7.1) (1.7)Profit for the period............................................... 38.3 45.5 30.3 28.7Attributable to:Equity attributable to owners of the company ..... 37.2 43.5 28.7 28.6Non-controlling interests ...................................... 1.1 2.0 1.6 0.1
38.3 45.5 30.3 28.7
Basic earnings per share (pence) ........................... 18.6 21.7 14.3 14.3Diluted earnings per share (pence)........................ 18.6 21.7 14.3 14.2
Group statement of comprehensive income
For the year ended 30 November For the six months ended 31May555555555 555555555
2010 2011 2011 20125555 5555 5555 5555
(£ million) (£ million, unaudited)
Profit for the period.............................................. 38.3 45.5 30.3 28.7Pension fund:— Actuarial losses ................................................ (0.1) (0.2) — (0.2)— Deferred tax ..................................................... — — — —Total comprehensive income for the period ............ 38.2 45.3 30.3 28.5Attributable to:Owners of the company ........................................ 37.1 43.3 28.7 28.4Non-controlling interests ...................................... 1.1 2.0 1.6 0.1Total comprehensive income for the period ............ 38.2 45.3 30.3 28.5
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Group balance sheetAs of
As of 30 November 31 May555555555 5555
2010 2011 20125555 5555 5555
(£ million) (£ million,unaudited)
Non-current assetsInvestment properties ............................................................... 828.0 848.7 795.3Operating property, plant & equipment ................................... 7.4 7.1 6.9Investments in joint ventures and associates ............................ 49.4 50.3 72.0Trade and other receivables ...................................................... 8.2 8.4 12.9
893.0 914.5 887.1
Current assets Inventories ................................................................................ 171.6 191.1 149.5Trade and other receivables ...................................................... 45.3 51.2 55.1Cash and cash equivalents ........................................................ 11.3 5.2 11.8
228.2 247.5 216.4
Current liabilities Trade and other payables ......................................................... (133.1) (132.2) (150.6)Borrowings ............................................................................... — — (20.8)Tax payables ............................................................................. (9.3) (0.2) (1.3)
(142.4) (132.4) (172.7)
Non-current liabilities Trade and other payables ......................................................... (215.1) (192.6) (61.6)Borrowings ............................................................................... (326.2) (352.3) (361.0)Deferred tax .............................................................................. (0.7) (8.7) (8.1)
(542.0) (553.6) (430.7)
Net assets .................................................................................. 436.8 476.0 500.1
Capital and reserves Share capital ............................................................................. 20.0 20.0 20.0Share premium .......................................................................... 102.8 102.8 102.8Capital redemption reserve ....................................................... 0.3 0.3 0.3Retained earnings ..................................................................... 304.7 341.8 365.8Own shares ............................................................................... (0.6) (0.5) (0.5)Equity attributable to owners of the company ......................... 427.2 464.4 488.4Non-controlling interest ........................................................... 9.6 11.6 11.7Total equity ............................................................................... 436.8 476.0 500.1
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Group cash flow statement
For the year ended 30 November For the six months ended 31May555555555 555555555
2010 2011 2011 20125555 5555 5555 5555
(£ million) (£ million, unaudited)
Operating activities Profit before interest and tax ................................ 58.3 74.1 45.2 40.4Gains on investment property disposals ............... (2.5) (0.5) — (0.9)Joint ventures and associates (post tax)................ (7.4) (2.9) (2.4) (19.2)Investment property revaluation losses/(gains) ..... (23.2) (36.2) (27.3) 1.8Depreciation ......................................................... 0.7 0.5 0.3 0.2Impairment losses on inventories.......................... 6.1 2.6 2.6 0.5Decrease/(increase) in inventories ......................... (1.6) (2.7) 10.2 58.8Increase in trade and other receivables ................. (12.5) (6.3) (24.8) (6.5)Increase/(decrease) in trade and other payables.... 29.0 (3.3) (11.4) (45.7)Share options and share awards ........................... (0.2) 0.1 0.9 0.4Tax (paid)/received................................................ 1.7 (6.0) — (1.2)Net cash inflow/(outflow) from operating activities 48.4 19.4 (6.7) 28.6
Interest received .................................................... 0.6 0.8 0.3 —Dividends received ................................................ — 2.0 2.0 —Net cash outflow from investing activities ............. (21.2) (24.3) (6.3) (13.1)
Financing activities Dividends paid...................................................... (2.0) (6.2) (4.0) (4.4)Dividends paid to non-controlling interests.......... (0.2) — — —Interest paid .......................................................... (21.1) (21.1) (10.5) (8.8)New borrowings drawn......................................... 33.1 131.3 40.0 12.0Repayment of borrowings .................................... (30.5) (105.2) (17.5) (8.3)Net cash (outflow)/inflow from financing activities. (20.7) (1.2) 8.0 (9.5)Increase/(decrease) in cash and cash equivalents .. 6.5 (6.1) (5.0) 6.0Cash and cash equivalents at start of period ........ 4.8 11.3 11.3 5.2Cash and cash equivalents at end of period ............ 11.3 5.2 6.3 11.2Cash ...................................................................... 11.3 5.2 11.3 11.8Bank overdrafts .................................................... — — (5.0) (0.6)Cash and cash equivalents at end of period ............ 11.3 5.2 6.3 11.2
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TERMS AND CONDITIONS OF THE OFFER
The Bonds may be offered to the public on a retail basis in accordance with the following terms andconditions. The Bonds are expected to be admitted to trading through the ORB market of the LondonStock Exchange on or about 8 November 2012.
Offer Price:
Total amount of the Offer:
Offer Period:
Conditions to which the Offer is subject:
Description of the application process:
Description of possibility to reduce subscriptions and manner for refunding excess amount paid by applicants:
Details of the minimum and/or maximum amount of application:
The Bonds will be issued at the Issue Price. Any Investor intending toacquire any Bonds from a bank, financial intermediary or other entity(including an Authorised Offeror) will do so in accordance with anyterms and other arrangements in place between the seller or distributorand such Investor, including as to price, allocations and settlementarrangements. None of the Issuer, the Joint Lead Managers or theTrustee are party to such arrangements with Investors and accordinglyInvestors must obtain such information from the relevant seller ordistributor. The Issuer, the Joint Lead Managers and the Trustee have noresponsibility to an Investor for such information.
The aggregate principal amount of the Bonds to be issued will dependpartly on the amount of Bonds for which indicative offers to subscribeare received during the Offer Period and will be specified in the SizingAnnouncement.
An offer of the Bonds may be made by the Joint Lead Managers and theother Authorised Offerors in the United Kingdom, Guernsey, Jersey andthe Isle of Man during the period from 17 October 2012 until 12.00 noon(London time) on 31 October 2012, or such earlier time and date asagreed between the Issuer and the Joint Lead Managers and announcedvia a Regulatory Information Service.
The issue of the Bonds will be conditional upon the SubscriptionAgreement being signed by the Issuer and the Joint Lead Managers andwill be made further to the terms of the Subscription Agreement. TheSubscription Agreement will include certain customary conditionsprecedent for transactions of this type (including the delivery of legalopinions and auditors comfort letters satisfactory to the Joint LeadManagers and the execution of the Trust Deed) and if these conditionsprecedent are not satisfied, the Joint Lead Managers may be released anddischarged from their obligations under the Subscription Agreementprior to the issue of the Bonds. For further information on theSubscription Agreement, see “Subscription and Sale”.
Investors will be notified by the Joint Lead Managers or otherAuthorised Offerors, as the case may be, of their allocations of Bondsand the settlement arrangements in respect thereof as soon as practicableafter the Sizing Announcement is made which may be after the OfferPeriod has ended.
After the closing time and date of the Offer Period no Bonds will beoffered for sale: (i) by or on behalf of the Issuer; or (ii) by any of theJoint Lead Managers and/or other Authorised Offerors (in theirrespective capacities as Joint Lead Managers or other AuthorisedOfferors) except with the consent of the Issuer.
Investors may not be allocated all of the Bonds for which they apply.
There will be no refund as Investors will not be required to pay for anyBonds until any application for Bonds has been accepted and the Bondsallotted.
The minimum subscription per Investor is £2,000 in principal amount ofthe Bonds. There is no maximum amount of application.
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Details of the method and time limits for paying up and delivering the Bonds:
Manner in and date on which results of the offer are to be made public:
Procedure for exercise of any right of pre-emption, negotiability of subscription rights and treatment of subscription rights not exercised:
Categories of potential investors to which the Bonds are offered and whether tranche(s) have been reserved for certain countries:
Process for notification to applicants of the amount allotted and the indication whether dealing may begin before notification is made:
Amount of any expenses and taxes specifically charged to the subscriber or purchaser:
Name(s) and address(es), to the extent known to the Issuer, of the placers in the various countries where the Offer takes place:
The Bonds will be issued on the Issue Date against payment to the Issuerby the Joint Lead Managers of the subscription moneys. Investors will benotified by the relevant Joint Lead Manager or their relevant AuthorisedOfferor (as applicable) of their allocations of Bonds (if any) and thesettlement arrangements in respect thereof.
The Sizing Announcement will be published on a Regulatory InformationService (expected to be the Regulatory News Service operated by theLondon Stock Exchange) prior to the Issue Date; such announcement iscurrently expected to be made on or around 31 October 2012.
Not applicable.
Bonds may be offered by the Authorised Offerors in the UnitedKingdom, Guernsey, Jersey and the Isle of Man during the Offer Period.Other than pursuant to Article 3(2) of the Prospectus Directive, theBonds will not be offered to the public in any Member State other thanin the United Kingdom. There is no reserve amount of Bonds applicableto any jurisdiction.
Investors will be notified by the relevant Joint Lead Manager or theirrelevant Authorised Offeror (as applicable) of their allocations of Bonds(if any) in accordance with the arrangements in place between therelevant Investor and the relevant Joint Lead Manager or otherAuthorised Offeror. No steps have been taken to allow dealings in theBonds prior to notification of the amount allotted.
The Issuer will not charge any expenses to any Investor in the Bonds.
The expenses to be charged by Authorised Offerors not known to theIssuer as of the date of this Prospectus may vary depending on the size ofthe amount subscribed for and the Investor’s arrangements with theAuthorised Offeror. The expenses to be charged by those AuthorisedOfferors not known to the Issuer as of the date of this Prospectus areunknown.
The Issuer estimates that, in connection with the sale of Bonds to anInvestor, the expenses charged by the Joint Lead Managers and the otherAuthorised Offerors known to it as of the date of this Prospectus will beup to 1.75 per cent. of the aggregate principal amount of the Bonds soldto such Investor.
Brewin Dolphin Limited (trading as Stocktrade)12 Smithfield StreetLondon EC1A 9BD
Killik & Co LLP46 Grosvenor StreetLondon W1K 3HN
NCL Investments Limited (trading as Smith and Williamson Securities)25 MoorgateLondon EC2R 6AY
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Entities which have a firm commitment to act as intermediaries in secondary market trading, providing liquidity through bid and offer rates and description of the main terms of their commitment:
The Joint Lead Managers will be appointed as registered market makersthrough ORB in respect of the Bonds from the date of admission of theBonds to trading.
Peel Hunt LLPMoor House120 London WallLondon EC2Y 5ET
who, as of the date of this Prospectus, are Authorised Offerors who haveeach been appointed by the Issuer and the Joint Lead Managers to offerand distribute the Bonds purchased from the Joint Lead Managers to thepublic in the United Kingdom, Guernsey, Jersey and the Isle of Man inaccordance with all prevailing regulatory requirements during the OfferPeriod.
The Issuer has also granted consent to the use of this Prospectus in suchjurisdictions during the Offer Period on the basis of the conditionsdescribed in the fifth paragraph on page i of this Prospectus.
None of the Issuer or any of the Joint Lead Managers has authorised,nor will they authorise, the making of any other offer of the Bonds inany other circumstances.
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TAXATION
United Kingdom
The summary set out below describes certain taxation matters of the United Kingdom based on theIssuer’s understanding of current law and practice in the United Kingdom as of the date of thisProspectus, both of which are subject to change, possibly with retrospective effect. The summary isintended as a general guide only and is not intended to be, nor should it be construed to be, legal or taxadvice.
The summary set out below applies only to persons who are the absolute beneficial owners of Bonds whohold their Bonds as investments and (save where it is explicitly stated otherwise) who are resident and (inthe case of individuals) ordinarily resident and domiciled for tax purposes in the United Kingdom. Someaspects do not apply to certain classes of person (such as dealers, certain professional investors andpersons connected with the Issuer) to whom special rules may apply. The United Kingdom tax treatmentof prospective Bondholders depends on their individual circumstances and may therefore differ to that setout below or may be subject to change in the future.
Prospective Bondholders who may be subject to tax in a jurisdiction other than the United Kingdom orwho may be unsure as to their tax position should seek their own professional advice. This summary onlydeals with the matters expressly set out below.
Interest on the Bonds
Withholding tax on the Bonds
Payments of interest on the Bonds may be made without deduction of or withholding on account ofUnited Kingdom income tax provided that the Bonds continue to be listed on a “recognised stockexchange” within the meaning of section 1005 of the Income Tax Act 2007 (the “Act”). The London StockExchange is a recognised stock exchange for these purposes. Securities will be treated as listed on theLondon Stock Exchange if they are included in the Official List (within the meaning of and in accordancewith the provisions of Part 6 of the FSMA) and admitted to trading on the London Stock Exchange.Provided, therefore, that the Bonds remain so listed, interest on the Bonds will be payable withoutwithholding or deduction on account of United Kingdom tax.
Where the Bonds cease to be listed, interest on the Bonds may be paid without withholding or deductionon account of United Kingdom tax where: (i) interest on the Bonds is paid by a company and, at the timethe payment is made, the Issuer reasonably believes (and any person by or through whom interest on theBonds is paid reasonably believes) that the person beneficially entitled to the interest is: (a) a companyresident in the United Kingdom; or (b) a company not resident in the United Kingdom which carries on atrade in the United Kingdom through a permanent establishment and which brings into account theinterest in computing its United Kingdom taxable profits; or (c) a partnership each member of which is acompany referred to in (a) or (b) above or a combination of companies referred to in (a) or (b) above,provided that HM Revenue & Customs (“HMRC”) has not given a direction (in circumstances where ithas reasonable grounds to believe that it is likely that one of the above exemptions is not available inrespect of such payment of interest at the time the payment is made) that the interest should be paid underdeduction of tax; or (ii) the Issuer has received a direction permitting payment without withholding ordeduction from HMRC in respect of such relief as may be available pursuant to the provisions of anyapplicable double taxation treaty.
In other cases, an amount must generally be withheld from payments of interest on the Bonds on accountof United Kingdom income tax at the basic rate (currently 20 per cent.). If interest were paid underdeduction of United Kingdom income tax, Bondholders who are not resident in the United Kingdom maybe able to recover all or part of the tax deducted if there is an appropriate provision in an applicable taxtreaty.
Provision of information and Savings Directive
Bondholders may wish to note that, in certain circumstances, HMRC has power to obtain information(including the name and address of the payee or beneficial owner of the interest) from any person in theUnited Kingdom who either pays or credits interest to or receives interest for the benefit of a Bondholderwho is an individual. Information so obtained may, in certain circumstances, be exchanged by HMRCwith the tax authorities of the jurisdiction in which the Bondholder is resident for tax purposes.
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Under the Savings Directive, Member States are required to provide to the tax authorities of anotherMember State details of payments of interest (or similar income) paid by a person within its jurisdiction to(or for the benefit of) an individual resident in that other Member State or to (or for the benefit of) certainlimited types of entities established in that other Member State. However, for a transitional period,Luxembourg and Austria are instead required (unless during that period they elect otherwise) to operate awithholding system in relation to such payments (the ending of such transitional period being dependentupon the conclusion of certain other agreements relating to information exchange with certain othercountries), subject to a procedure whereby, on meeting certain conditions, the beneficial owner of theinterest or other income may request that no tax be withheld. A number of non-EU countries andterritories including Switzerland have adopted similar measures (a withholding system in the case ofSwitzerland).
The European Commission has proposed certain amendments to the Savings Directive, which may, ifimplemented, amend or broaden the scope of the requirements described above.
Further United Kingdom income tax issues
Interest on the Bonds constitutes United Kingdom source income for tax purposes and, as such, may besubject to income tax by direct assessment even where paid without withholding, irrespective of theresidence of the Bondholder.
However, interest with a United Kingdom source properly received without deduction or withholding onaccount of United Kingdom tax will not be chargeable to United Kingdom tax in the hands of aBondholder (other than certain trustees) who is not resident for tax purposes in the United Kingdomunless that Bondholder carries on a trade, profession or vocation in the United Kingdom through aUnited Kingdom branch or agency in connection with which the interest is received or to which the Bondsare attributable (and where that Bondholder is a company, unless that Bondholder carries on a trade in theUnited Kingdom through a permanent establishment in connection with which the interest is received orto which the Bonds are attributable). There are exemptions for interest received by certain categories ofagent (such as some brokers and investment managers). The provisions of an applicable double taxationtreaty may also be relevant for such Bondholders.
Bondholders should note that the Issuer will not be required to pay any additional amounts (as referred toin “Terms and Conditions of the Bonds – Taxation”) in respect of Taxes that HMRC may seek to directlyassess on any person as a result of their entitlement to receive interest on the Bonds.
United Kingdom corporation tax payers
In general, Bondholders which are within the charge to United Kingdom corporation tax (includingnon-resident Bondholders whose Bonds are used, held or acquired for the purposes of trade carried on inthe United Kingdom through a permanent establishment) will be charged to tax as income on all returns,profits or gains on, and fluctuations in value of, the Bonds (whether attributable to currency fluctuationsor otherwise) broadly in accordance with their statutory accounting treatment.
Other United Kingdom tax payers
Interest
Bondholders who are either individuals or trustees and are resident or ordinarily resident for tax purposesin the United Kingdom or who carry on a trade, profession or vocation in the United Kingdom througha branch or agency to which the Bonds are attributable will generally be liable to United Kingdom tax onthe amount of any interest received in respect of the Bonds.
Transfer (including redemption)
For Bondholders who are individuals, the Bonds will constitute “qualifying corporate bonds” within themeaning of section 117 of the Taxation of Chargeable Gains Act 1992. Accordingly, a disposal by such aBondholder of a Bond will not give rise to a chargeable gain or an allowable loss for the purposes ofUnited Kingdom taxation of chargeable gains.
Accrued income scheme
On a disposal of Bonds by a Bondholder who is an individual, any interest which has accrued since the lastinterest payment date may be chargeable to tax as income under the rules of the accrued income schemeas set out in Part 12 of the Act, if that Bondholder is resident or ordinarily resident in the United Kingdom
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or carries on a trade in the United Kingdom through a branch or agency to which the Bonds areattributable.
Individual Savings Accounts
For Bondholders who are individuals, the Bonds will be qualifying investments for the stocks and sharescomponent of an account (an “ISA”) under the Individual Savings Account Regulations 1998 (the “ISARegulations”) provided that at the date the Bonds are first held under the account, the Bonds are notrequired to be re-purchased or redeemed nor allow Bondholders to require the Bonds to be repurchased orredeemed except in circumstances which are neither certain nor likely to occur, in each case within theperiod of five years from that date. Individual Bondholders who acquire or hold their Bonds through anISA and who satisfy the requirements for tax exemption in the ISA Regulations will not be subject toUnited Kingdom tax on interest or other amounts received in respect of the Bonds.
The opportunity to invest in Bonds through an ISA is restricted to individuals. Individuals wishing topurchase the Bonds through an ISA should contact their professional advisers regarding their eligibility.
Stamp duty and Stamp Duty Reserve Tax (“SDRT”)
No United Kingdom stamp duty or SDRT is payable on the issue or transfer by delivery of the Bonds oron their redemption.
Inheritance tax
Provided that the relevant Bonds are physically held outside the United Kingdom at the time of death orwhen a gift is made, no inheritance tax is charged on such death or gift if the Bondholder is neitherdomiciled, nor deemed to be domiciled, in the United Kingdom. Where the Bonds are held in a clearingsystem, HMRC is known to consider that the situs of the relevant assets is not necessarily determined bythe place where the Bonds are physically held.
Prospective Bondholders to whom this may be of significance are asked to consult their own professionaladvisers.
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CLEARING AND SETTLEMENT
Following their delivery into a clearing system, interests in Bonds may be delivered, held and settled inCREST by means of the creation of CDIs representing the interests in the relevant Underlying Bonds. TheCDIs will be issued by the CREST Depository to CDI Holders and will be governed by English law.
Investors should note that the CDIs are the result of the CREST settlement mechanics and are not thesubject of this Prospectus.
The CDIs will represent indirect interests in the interest of the CREST Nominee in the Underlying Bonds.Pursuant to the CREST Manual, Bonds held in global form by the Common Depositary may be settledthrough CREST, and the CREST Depository will issue CDIs. The CDIs will be independent securities,constituted under English law which may be held and transferred through CREST.
Interests in the Underlying Bonds will be credited to the CREST Nominee’s account with Euroclear andthe CREST Nominee will hold such interests as nominee for the CREST Depository which will issue CDIsto the relevant CREST participants.
Each CDI will be treated by the CREST Depository as if it were one Underlying Bond, for the purposesof determining all rights and obligations and all amounts payable in respect thereof. The CRESTDepository will pass on to CDI Holders any interest or other amounts received by it as holder of theUnderlying Bonds on trust for such CDI Holder. CDI Holders will also be able to receive from theCREST Depository notices of meetings of holders of Underlying Bonds and other relevant notices issuedby the Issuer.
Transfers of interests in Underlying Bonds by a CREST participant to a participant of Euroclear orClearstream, Luxembourg will be effected by cancellation of the CDIs and transfer of an interest in suchUnderlying Bonds to the account of the relevant participant with Euroclear or Clearstream, Luxembourg.
The CDIs will have the same ISIN as the ISIN of the Underlying Bonds and will not require a separatelisting on the Official List.
Prospective subscribers for Bonds represented by CDIs are referred to Chapter 3 of the CREST Manualwhich contains the form of the CREST Deed Poll to be entered into by the CREST Depository. The rightsof the CDI Holders will be governed by the arrangements between CREST, Euroclear, Clearstream,Luxembourg and the Issuer including the CREST Deed Poll (in the form contained in Chapter 3 of theCREST International Manual (which forms part of the CREST Manual)) executed by the CRESTDepository. These rights may be different from those of holders of Bonds which are not represented byCDIs.
If issued, CDIs will be delivered, held and settled in CREST, by means of the CREST InternationalSettlement Links Service. The settlement of the CDIs by means of the CREST International SettlementLinks Service has the following consequences for CDI Holders:
(i) CDI Holders will not be the legal owners of the Underlying Bonds. The CDIs are separate legalinstruments from the Underlying Bonds to which they relate and represent an indirect interest insuch Underlying Bonds.
(ii) The Underlying Bonds themselves (as distinct from the CDIs representing indirect interests in suchUnderlying Bonds) will be held in an account with a custodian. The custodian will hold theUnderlying Bonds through a clearing system. Rights in the Underlying Bonds will be held throughcustodial and depository links through the appropriate clearing systems. The legal title to theUnderlying Bonds or to interests in the Underlying Bonds will depend on the rules of the clearingsystem in or through which the Underlying Bonds are held.
(iii) Rights under the Underlying Bonds cannot be enforced by CDI Holders except indirectly throughthe intermediary depositaries and custodians described above. The enforcement of rights under theUnderlying Bonds will therefore be subject to the local law of the relevant intermediary. The rightsof CDI Holders to the Underlying Bonds are represented by the entitlements against the CRESTDepository which (through the CREST Nominee) holds interests in the Underlying Bonds. Thiscould result in an elimination or reduction in the payments that otherwise would have been made inrespect of the Underlying Bonds in the event of any insolvency or liquidation of the relevantintermediary, in particular where the Underlying Bonds held in clearing systems are not held inspecial purpose accounts and are fungible with other securities held in the same accounts on behalfof other customers of the relevant intermediaries.
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(iv) The CDIs issued to CDI Holders will be constituted and issued pursuant to the CREST Deed Poll.CDI Holders will be bound by all provisions of the CREST Deed Poll and by all provisions of orprescribed pursuant to, the CREST Manual and the CREST Rules and CDI Holders must complyin full with all obligations imposed on them by such provisions.
(v) Potential investors should note that the provisions of the CREST Deed Poll, the CREST Manualand the CREST Rules contain indemnities, warranties, representations and undertakings to begiven by CDI Holders and limitations on the liability of the issuer of the CDIs, the CRESTDepository.
(vi) CDI Holders may incur liabilities resulting from a breach of any such indemnities, warranties,representations and undertakings in excess of the money invested by them. The attentionof potential investors is drawn to the terms of the CREST Deed Poll, the CREST Manualand the CREST Rules, copies of which are available from CREST at 33 Cannon Street,London EC4M 5SB or by calling +44 (0) 207 849 0000 or from the CREST website atwww.euroclear.com/site/public/EUI.
(vii) Potential investors should note CDI Holders may be required to pay fees, charges, costs andexpenses to the CREST Depository in connection with the use of the CREST InternationalSettlement Links Service. These will include the fees and expenses charged by the CRESTDepository in respect of the provision of services by it under the CREST Deed Poll and any taxes,duties, charges, costs or expenses which may be or become payable in connection with the holdingof the CDI’s through the CREST International Settlement Links Service.
(viii) Potential investors should note that none of the Issuer, the Joint Lead Managers, the Trustee, thePaying Agent or their respective advisers will have any responsibility for the performance by anyintermediaries or their respective direct or indirect participants or accountholders of their respectiveobligations under the rules and procedures governing their operations.
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SUBSCRIPTION AND SALE
Pursuant to a subscription agreement expected to be dated on or about 31 October 2012 (the “SubscriptionAgreement”), Investec Bank plc and Numis Securities Limited (together the “Joint Lead Managers” andeach, a “Joint Lead Manager”) are expected to agree to procure subscribers for the Bonds at the issue priceof 100 per cent. of the principal amount of Bonds, less an arrangement, management and distribution fees.The Joint Lead Managers will receive fees of 0.75 per cent. of the principal amount of the Bonds.St. Modwen will pay a distribution fee of 0.5 per cent. of the principal amount of the Bonds to be sharedbetween the Joint Lead Managers and the other Authorised Offerors. The Issuer will also reimburse eachof the Joint Lead Managers in respect of certain of its expenses, and is expected to agree to indemnify eachof the Joint Lead Managers against certain liabilities, incurred in connection with the issue of the Bonds.The Subscription Agreement may be terminated in certain circumstances prior to payment of the Issuer.The issue of the Bonds will not be underwritten by the Joint Lead Managers or any other person.
Selling restrictions
The Issuer and the Joint Lead Managers have agreed to comply with the selling restrictions set out below.
United States
The Bonds have not been and will not be registered under the Securities Act and the Bonds are subject toU.S. tax law requirements. Subject to certain exceptions, the Bonds may not be offered, sold or deliveredwithin the United States or to, or for the account or benefit of, U.S. persons. Each Joint Lead Managerhas agreed that it will not offer, sell or deliver any Bonds within the United States or to, or for the accountor benefit of, U.S. persons.
United Kingdom
Each Joint Lead Manager has represented and agreed that:
(i) it has only communicated or caused to be communicated and will only communicate or cause to becommunicated any invitation or inducement to engage in investment activity (within the meaning ofsection 21 of FSMA) received by it in connection with the issue or sale of any Bonds incircumstances in which section 21(1) of FSMA would not apply to the Issuer; and
(ii) it has complied and will comply with all applicable provisions of FSMA with respect to anythingdone by it in relation to any Bonds in, from or otherwise involving the United Kingdom.
Jersey
Each Joint Lead Manager has represented and agreed that it has not made and will not make an offer ofBonds which are the subject of the offering contemplated by this Prospectus, save to the extent that suchJoint Lead Manager is authorised, or otherwise permitted, to do so pursuant to the Financial Services(Jersey) Law 1998 and/or the Control of Borrowing (Jersey) Order 1958.
Guernsey
Each Joint Lead Manager has represented and agreed that:
(i) the Bonds cannot be marketed, offered or sold in or to persons resident in Guernsey other than incompliance with the licensing requirements of the Protection of Investors (Bailiwick of Guernsey)Law 1987, as amended, and the regulations enacted thereunder, or any exemption therefrom;
(ii) this Prospectus has not been approved or authorised by the Guernsey Financial ServicesCommission for circulation in Guernsey; and
(iii) this Prospectus may not be distributed or circulated, directly or indirectly, to any persons in theBailiwick of Guernsey other than:
(a) by a person licensed to do so under the terms of the Protection of Investors (Bailiwick ofGuernsey) Law 1987, as amended; or
(b) to those persons regulated by the Guernsey Financial Services Commission as licensees underthe Protection of Investors (Bailiwick of Guernsey) Law 1987, as amended, the BankingSupervision (Bailiwick of Guernsey) Law 1994, the Insurance Business (Bailiwick of
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Guernsey) Law 2002 or the Regulation of Fiduciaries, Administration Business andCompany Directors etc. (Bailiwick of Guernsey) Law 2000.
Isle of Man
Each Joint Lead Manager has represented and agreed that the Bonds cannot be marketed, offered or soldin, or to persons resident in, the Isle of Man, other than in compliance with the licensing requirements ofthe Isle of Man Financial Services Act 2008 and the Regulated Activities Order 2011 or any exemptiontherefrom.
Public Offer Selling Restriction Under the Prospectus Directive
In relation to each Member State of the European Economic Area which has implemented the ProspectusDirective (each, a “Relevant Member State”), each Joint Lead Manager has represented and agreed thatwith effect from and including the date on which the Prospectus Directive is implemented in that RelevantMember State (the “Relevant Implementation Date”) it has not made and will not make an offer of Bondswhich are the subject of the offering contemplated by this Prospectus to the public in that RelevantMember State other than the offers contemplated in the Prospectus in the United Kingdom from the timethe Prospectus has been approved by the competent authority in the United Kingdom and published inaccordance with the Prospectus Directive as implemented in the United Kingdom until the Issue Date orsuch later date as the Issuer may permit, except that it may, with effect from and including the RelevantImplementation Date, make an offer of Bonds to the public in that Relevant Member State:
(i) to any legal entity which is a qualified investor as defined in the Prospectus Directive;
(ii) to fewer than 100, or, if the Relevant Member State has implemented the relevant provision of the2010 PD Amending Directive, 150, natural or legal persons (other than qualified investors asdefined in the Prospectus Directive), subject to obtaining the prior consent of the Joint LeadManagers; or
(iii) in any other circumstances falling within Article 3(2) of the Prospectus Directive,
provided that no such offer of Bonds referred shall require the Issuer or either Joint Lead Manager topublish a prospectus pursuant to Article 3 of the Prospectus Directive or supplement a prospectuspursuant to Article 16 of the Prospectus Directive.
In this provision, the expression an “offer of Bonds to the public” in relation to any Bonds in any RelevantMember State means the communication in any form and by any means of sufficient information on theterms of the offer and the Bonds to be offered so as to enable an investor to decide to purchase orsubscribe the Bonds, as the same may be varied in that Relevant Member State by any measureimplementing the Prospectus Directive in that Member State; the expression “Prospectus Directive” meansDirective 2003/71/EC (and amendments thereto, including the 2010 PD Amending Directive, to the extentimplemented in the Relevant Member State), and includes any relevant implementing measure in eachRelevant Member State; and the expression “2010 PD Amending Directive” means Directive 2010/73/EU.
General
No action has been taken by the Issuer or any of the Joint Lead Managers that would, or is intended to,permit a public offer of the Bonds in any country or jurisdiction where any such action for that purpose isrequired. Accordingly, each Joint Lead Manager has agreed that it will comply to the best of its knowledgeand belief in all material respects with all applicable laws and regulations in each jurisdiction in which itacquires, offers, sells or delivers Bonds or has in its possession or distributes this Prospectus (inpreliminary, proof or final form) or any amendment or supplement thereto or any other offering material,in all cases at its own expense.
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GENERAL INFORMATION
1. Listing of the Bonds
It is expected that the admission of the Bonds to the Official List will be granted on or about 8 November2012, after the publication of the Sizing Announcement subject only to the issue of the Global Bond.Application will be made to the UK Listing Authority for the Bonds to be admitted to the Official Listand to the London Stock Exchange for such Bonds to be admitted to trading on the Regulated Marketand through the ORB. Admission of the Bonds to trading is expected to occur on 8 November 2012.
The amount of expenses related to the admission to trading of the Bonds will be specified in the SizingAnnouncement.
2. Authorisation
The issue of the Bonds was duly authorised by a resolution of the Board of Directors of the Issuer passedon 24 September 2012 and a resolution of a committee of the Board of Directors of the Issuer passed on16 October 2012.
The Issuer has obtained all necessary consents, approvals and authorisations in England and Wales inconnection with the issue and performance of the Bonds.
3. Significant or material change
There has been no significant change in the financial or trading position of the Issuer or the Group since31 May 2012 and there has been no material adverse change in the prospects of the Issuer or the Groupsince 30 November 2011.
4. Litigation
Neither the Issuer nor or any other member of the Group is or has been involved in any governmental,legal or arbitration proceedings (including any such proceedings which are pending or threatened of whichthe Issuer is aware) during the 12 month period preceding the date of this Prospectus which may have orhave had in the recent past, significant effects on the Issuer and/or Group’s financial position orprofitability.
5. Clearing systems
The Bonds have been accepted for clearance through Euroclear and Clearstream, Luxembourg. Inaddition, the Bonds will be accepted for settlement in CREST via the CDI mechanism. Interests in theBonds may also be held through CREST through the issuance of CDIs representing the UnderlyingBonds. Investors should note that the CDIs are the result of the CREST settlement mechanics and are notthe subject of this Prospectus. The ISIN for the Bonds is XS0841076465 and the Common Code is084107646.
The address of Euroclear is Euroclear Bank S.A./N.V., 1 Boulevard du Roi Albert II, B-1210 Brussels, theaddress of Clearstream, Luxembourg is Clearstream Banking société anonyme, 42 Avenue JF Kennedy,L-1855 Luxembourg and the address of CREST is Euroclear UK & Ireland, 33 Cannon Street, LondonEC4M 5SB.
6. Documents available for inspection
For the period of 12 months following the date of this Prospectus, copies of the following documents will,when published, be available for inspection from the registered office of the Issuer:
(a) the Articles of Association of the Issuer;
(b) the audited consolidated financial statements of the Issuer in respect of the financial years ended30 November 2009, 2010 and 2011, in each case together with the audit reports prepared inconnection therewith;
(c) the most recently published interim financial statements (if any) of the Issuer, together with anyaudit or review reports prepared in connection therewith;
(d) the Trust Deed and the Paying Agency Agreement;
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(e) a copy of this Prospectus; and
(f) any future offering circulars, prospectuses, information memoranda and supplements to thisProspectus and any other documents incorporated herein or therein by reference.
7. Auditors
The financial statements of the Issuer have been audited without qualification for the financial periodsended 30 November 2009, 2010 and 2011 by Deloitte LLP, Chartered Accountants and Statutory Auditors(a member of the Institute of Chartered Accountants in England and Wales) of Four Brindleyplace,Birmingham B1 2HZ, United Kingdom.
8. Yield
On the basis of the issue price of the Bonds of 100 per cent. of their principal amount, the yield of theBonds is expected to be 6.25 per cent. on an annual basis. It is not an indication of future yield.
9. Interests of natural and legal persons
So far as the Issuer is aware, no person involved in the offer of the Bonds has an interest material to theoffer. There are no conflicts of interest which are material to the offer of the Bonds.
10. Joint Lead Managers transacting with the Issuer
Certain of the Joint Lead Managers and their affiliates have engaged, and may in the future engage, ininvestment banking and/or commercial banking transactions with, and may perform services for, theIssuer and its affiliates in the ordinary course of business.
11. Material contracts
The following is a summary of each contract (not being a contract entered into in the ordinary course ofthe Issuer’s business) that has been entered into by the Issuer or any member of the Group which couldresult in any member of the Group being under an obligation or entitlement that is material to the Issuer’sability to meet its obligations to security holders in respect of the Bonds:
Lloyds TSB Bank plc revolving credit facility (£100 million)
On 30 November 2011, St. Modwen as borrower and Lloyds TSB Bank plc (“Lloyds”), as arranger, agent,security trustee and lender entered into an agreement to provide St. Modwen with a revolving creditfacility of up to £100 million until 30 November 2014.
Under this agreement, St. Modwen made certain financial covenants including as to its interest cover, networth, gearing and loan to value ratios.
St. Modwen also gave certain customary warranties and undertakings to Lloyds.
Royal Bank of Scotland plc revolving loan and overdraft facility (combined total of £95 million)
On 28 March 2011, St. Modwen as borrower and The Royal Bank of Scotland plc (“RBS”), as agent forNational Westminster Bank Plc as agent, security trustee and lender entered into an agreement to provideSt. Modwen with a revolving loan facility of up to £90 million together with an overdraft facility of£5 million until 30 November 2015.
Under this agreement, St. Modwen made certain financial covenants including as to its interest cover, networth, gearing and loan to value ratios.
St. Modwen also gave certain customary warranties and undertakings to RBS.
HSBC Bank plc facility (£75 million)
On 3 February 2011, St. Modwen, as borrower and HSBC Bank plc (“HSBC”) as lender entered into anagreement to provide St. Modwen with a loan facility of up to £75 million until December 2015.
Under this agreement, St. Modwen made certain financial covenants including as to its interest cover, networth, gearing and loan to value ratios.
St. Modwen also provided certain customary warranties and undertakings to HSBC.
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Barclays Bank PLC revolving credit facility (£65 million)
On 3 November 2010, St. Modwen as borrower and Barclays Bank PLC (“Barclays”) as lender enteredinto an amendment to an original facility agreement dated 7 February 2008. Under this agreement (assubsequently amended from time to time) Barclays agreed to provide St. Modwen with a revolving creditfacility of up to £65 million until 30 September 2015.
Under this agreement, St. Modwen made certain financial covenants including as to its interest cover, networth, gearing and loan to value ratios.
St. Modwen also gave certain customary warranties and undertakings to Barclays.
Bank of Ireland revolving credit facility (£50 million)
On 30 July 2010, St. Modwen as borrower and The Governor and Company of the Bank of Ireland(“BoI”) as agent, security trustee and lender entered into an amendment agreement to a facility agreementoriginally dated 8 September 2006. Under this agreement (as subsequently amended from time to time),BoI agreed to provide St. Modwen with a revolving loan facility of up to £50 million until 30 November2014. On 21 October 2011, BoI assigned its interest in this facility to KW UK Loan Partners Limited.
Under this agreement, St. Modwen made certain financial covenants including as to its interest cover, networth, gearing and loan to value ratios.
St. Modwen also provided certain customary warranties and undertakings to BoI.
Barclays VSM revolving facility (£30,978,439)
On 3 August 2006, VSM Estates Limited (“VSM”) as borrower and Barclays, as agent, security trusteeand lender entered into an agreement to provide VSM with a revolving loan facility of up to £100 millionto finance its obligations under a project for the Ministry of Defence (to manage the delivery ofconsolidation works at the RAF Northolt site and sell surplus sites on behalf of the Ministry of Defence).This agreement has been amended from time to time and the facility level has been reduced over time to£30,978,439.
This facility is due to be repaid on 31 March 2015. Barclays has the option to extend the facility on eachof 31 March 2013 and 31 March 2014 for a further year in each case, and to a maximum term extendingto 31 March 2017.
Under this agreement, VSM made certain financial covenants including as to its interest cover, net worth,gearing and loan to value ratios.
VSM’s obligations under the facility are guaranteed by St. Modwen and VINCI PLC.
Santander revolving loan facility (£30 million)
On 31 January 2011, St. Modwen, as borrower and Abbey National Treasury Services plc (“Santander”)as agent, security trustee and lender entered into an agreement to provide St. Modwen with a revolvingloan facility of up to £30 million until 31 January 2016.
Under this agreement, St. Modwen made certain financial covenants including as to its interest cover, networth and loan to value ratios.
St. Modwen also gave certain customary warranties and undertakings to Santander.
Barclays Trentham facility (£19 million)
On 30 November 2011, Trentham Leisure Limited (“Trentham”) as borrower, Barclays as lender and St.Modwen as guarantor entered into an agreement to provide Trentham with a loan facility of up to£19 million until 30 September 2015.
Under this agreement, Trentham made certain covenants to procure that St. Modwen meets certainfinancial tests including as to St. Modwen’s interest cover, net worth, gearing and loan to value ratios.
Trentham also provided certain customary warranties and undertakings to Barclays.
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Deutsche Pfandbriefbank AG loan facility (£4,956,200)
On 9 June 1999, Holaw (462) Limited (“Holaw”) as borrower and Deutsche Pfandbriefbank AG(“Deutsche”) as lender entered into an agreement to provide Holaw with a loan of £6,030,000. This loan isto be repaid over a period of 20 years. As of 31 May 2012, the outstanding loan totalled £4,956,200.
Holaw and other members of the Group provided certain customary warranties and undertakings toDeutsche.
KPI revolving credit and overdraft facility (combined total of £135 million)
On 30 March 2012, Key Property Investments Limited (“KPI”), a joint venture between St. Modwen andSalhia Real Estate Company K.S.C., as borrower and Bank of Scotland plc (“BOS”) as arranger, securitytrustee and agent together with RBS and Santander as lenders entered into an agreement to provide KPIwith a revolving credit facility of up to £130 million together with an overdraft facility of £5 million until31 March 2017. The facility will be reduced by £10 million on each of 31 March 2015 and 2016.
Under this agreement, KPI made certain financial covenants including as to its interest cover, gearing andloan to value ratios.
Security was granted over all property assets of the KPI Group plus a debenture over the members of theKPI Group. The KPI Group has granted a first legal charge over each property asset of the KPI Grouptogether with a debenture given by each member of the KPI Group.
St. Modwen and Salhia Real Estate Company K.S.C. provided parent company guarantees, with theirrespective aggregate liabilities capped at 50 per cent. each of the total commitment under the agreementfrom time to time.
VSM Uxbridge facility (£50 million)
On 20 April 2012, VSM Estates (Uxbridge) Limited (“VSM Uxbridge”), a member of the joint venturegroup ultimately owned by St. Modwen and VINCI PLC, as borrower and HSBC as lender entered intoan agreement to provide VSM Uxbridge with an initial loan facility of up to £60 million until 31 March2017. This facility is to be repaid as set out below:
Dates within which the facility is to be repaid Minimum amount of facility to be repaid
31 March 2012 to 30 March 2013 £10 million (repaid on 28 September 2012)31 March 2013 to 30 March 2014 £10 million31 March 2014 to 30 March 2015 £10 million31 March 2015 to 30 March 2016 £10 million31 March 2016 to 31 March 2017 £20 million
This agreement included a financial covenant given by St. Modwen in relation to its loan to value ratio inrelation to RAF Uxbridge.
VSM Uxbridge’s obligations under the facility are guaranteed by St. Modwen and VINCI PLC.
