SGS Group the owner of four major UK shopping and leisure destinations – Lakeside, Atria Watford, Victoria Centre (Nottingham) and Braehead (near Glasgow) – has completed a landmark recapitalisation which includes £445 million of new senior financing from Lloyds Bank.
The refinancing comprises a £395 million senior term loan and a £50 million capex facility, reflecting Lloyds Bank’s support for SGS and the sector.
The senior term loan, which has an initial maturity in 2028 and can then be extended by up to a year, is fully drawn and has been used alongside available cash to repay a total of £444 million to existing creditors. The residual £1.3 billion of SGS debt not repaid from the transaction has been exchanged into equity or equity-like equivalents within the structure.
As part of the deal, a new SGS Board will be appointed with Jaap Tonckens, former Group CFO of Unibail-Rodamco-Westfield, as Non-Executive Chairman, and Peter Williams, Jon Lurie and Anders Hemmingsen as Non-Executive Board members – with extensive operational retail and investment experience.
The landmark transaction received significant support – with 100% of creditors who voted supporting the deal – and reflects the strong operational performance seen across SGS centres in recent years.
SGS separated from Intu Properties when the landlord entered into administration in 2020, appointing AlixPartners in an executive management and Board role, Global Mutual as asset manager and Savills as property manager.
Since taking over management, SGS has performed very strongly:
- Physical occupancy at SGS centres has increased to 93% in December 2023 – with over 300 new long-term leases signed since Global Mutual’s appointment.
- Footfall across the centres has risen significantly since 2021, outperforming the relevant peer benchmark every month from January 2022 to December 2023 (as indexed against 2019 footfall).
- SGS has delivered a 22% increase in static net rental income – to £80.5 million in December 2023, compared to June 2022, when it was first reported.
- SGS tenants – including household names such as Marks & Spencer, H&M and ZARA – have demonstrated a strong commitment to all four centres, investing over £68 million of their own capital since 2020 in upsizing and enhancing their stores.
The recapitalisation transaction marks a shift to institutional standard governance and management for SGS, which is designed to follow a typical real estate privately-owned structure.
SGS has been supported by AlixPartners (Executive management/Board role and restructuring adviser), Global Mutual (Asset Manager), Savills (Property Manager), Linklaters (Legal Adviser), PwC (Tax and Accounting adviser), Rothschild & Co (Financial Adviser in respect of the new senior financing), Powerscourt (PR and Communications Adviser), Moelis (Financial Adviser to the Steering Committee of SGS’s lenders) and Kirkland & Ellis (Legal Adviser to the Steering Committee of SGS’s lenders).
