Mall activists win quick

Westfield Shopping Center in London.


Photo:

peter nicholls / Reuters

Transatlantic shopping center giant Unibail-Rodamco-Westfield URW -0.12%

withdrew from the edge of the abyss. Finding a lasting solution to your debt problem will be more difficult.

On Wednesday evening, Europe’s largest listed real estate company by assets said it had issued bonds worth € 2 billion, equivalent to $ 2.4 billion: one with a six-year maturity and a 0.625% coupon and an 11-year bond at 1.375%. Half of the cash will be used to refinance existing debt. The size and low cost of the show is a victory for activist investors who have pushed for a new approach.

Alongside French telecoms billionaire Xavier Niel, former Unibail CEO Léon Bressler managed to convince investors to vote against a controversial € 3.5 billion capital increase two weeks ago. At the time, Unibail’s chairman and CEO warned that unless shareholders back down, the company could lose access to the bond markets. Both men have since been ousted, with Mr Bressler taking the chair.

News that a Covid-19 vaccine will be available soon has helped campaigners’ cases. The yield on Unibail’s outstanding bonds has risen slightly since investors voted against the capital increase, but remains well below that of the March sell-off.

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This new debt will come on top of the net borrowings already equivalent to 12 times the earnings before interest, taxes, depreciation and amortization generated by Unibail last year. To bring that number down, campaigners want Unibail to sell underperforming Westfield malls in the United States. But with the rise of e-commerce weighing down the value of stores, it can be difficult to find buyers at an acceptable price.

The company can still raise equity. Unibail shares have risen 85% since Pfizer said its vaccine was effective. Under the old management’s plan to raise 3.5 billion euros, shareholders would have been diluted by 37%, according to UBS.

During today’s higher share price, this dilution drops to 28%. Unibail must maintain the softness of the bond markets: any increase in the cost of debt would make it more difficult to refinance its 29 billion euros in total borrowings.

Mr Bressler has been right so far, but more difficult decisions are yet to come.

Write to Carol Ryan at carol.ryan@wsj.com

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Appeared in the print edition of November 27, 2020 under the title “Activists win against major European real estate company”.


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Peggy P. Gilmore