UPDATE: Tesco Plans Benchmark Commercial Mortgage Bond

29th Jun 2010 14:12

(Adds background.) By Mark Brown Of DOW JONES NEWSWIRES LONDON (Dow Jones)--U.K. retailer Tesco PLC (TSCO.LN) is planning to issue a benchmark bond backed by a commercial mortgage loan, a banker involved in the deal said Tuesday. The collateral for the loan is the leasehold interest in 41 U.K. commercial properties, all of which are let to Tesco-related entities, according to a ratings report from Moody's Investors Service, which has assigned a provisional A3 rating to the bonds. Goldman Sachs Group Inc. and HSBC Holdings PLC are acting as co-arrangers. The deal is expected to price later Tuesday, or Wednesday. The bonds will be issued by a vehicle called Tesco Property Finance 3 PLC. Tesco sold similar bonds in June and September last year. These deals attracted attention in the market as they were among the first new U.K. commercial mortgage-backed securities to be sold to investors since the start of the financial crisis. The financial crisis was itself caused by the collapse of the market for bonds backed by mortgage or other loan repayments. But because all the properties are let to Tesco, and because Tesco guarantees the leases, some market participants said that this kind of bond is not a typical CMBS issue, but should be thought of as a structured corporate bond. -By Mark Brown, Dow Jones Newswires; + 44 (0)207 842 9485; [email protected] (END) Dow Jones Newswires June 29, 2010 09:12 ET (13:12 GMT)