Broker snap: Seymour Pierce closely watching Capital Shopping debt issue

20th Sep 2012 13:46

In a research note sent to clients this morning analysts from Seymour Pierce indicate that they will be closely watching for the success -or not- of real estate investment trust (REIT) Capital Shopping Centres´ just announced debt issue. In their own words, the transaction "[adds] to the proliferation of debt and equity raises in the sector." More specifically, they point out how the terms offered are somewhat higher than those offered by British Land in a recent debt sale of its own. As well, Seymour Pierce adds that: "Given the equity yield of 4.4%, and that CSCG is currently trading at an 11.3% discount to its June 30 2012 net asset value of 390p, the success of the issue is purely predicated on debt funds which have to deploy into the debt or convertible market rather than investors with a choice between debt and equity."In a positive tone, the say that: "The issue will provide, in our view, a much needed potential capital injection into a business which is struggling to make the investment we believe is necessary to maintain the appeal of its centres. The group has also said that it is considering selling stakes of up to 25% in specific centres in order to provide further funding. Its LTV at 48% as at June 30 2012 would have further deteriorated by year end leaving the group vulnerable to any protracted UK economic malaise."If the issue is successful and the other equity divestments occur we believe this may be very good news for the group as it would go a long way to rectifying the core financing problems of the group which we have regularly highlighted. The shares should react positively to the success of the issue and we will be reviewing our forecasts once the outcome has been published."Seymour Pierce is currently telling clients to "reduce" shares of Capital Shopping Centres and has a target price of 327p. AB