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Yorkshire Water Services £450m Class B refinancing reaches conclusion

On 22nd March 2016, Yorkshire Water Services (“YWS”), the water supply and treatment utility company servicing Yorkshire and parts of North Lincolnshire and Derbyshire, completed the refinancing of its £450m Class B bond.

The last leg of the refinancing involved a bilateral exchange, with £200m of new publicly listed fixed to floating rate bonds issued to partially pay for the tender and subsequent cancellation of £190m nominal of the outstanding 6% 2025 bonds which have a call and step up in margin to 3m Libor +840bps in April 2017. The new bonds have a fixed coupon of 3.75% until March 2023 and were issued at a spread to Gilts of 240bps. Barclays, RBS and Santander GCB acted as joint dealer managers and joint bookrunners on the new issue. Barclays acted as Offeror in relation to the tender of the existing bonds.

This transaction followed the signing in December 2015 of £260m of deferred draw Class B floating rate and index-linked loan facilities of intermediate maturities with one bank lender and two institutional investors.

Centrus provided financial advice to YWS covering the strategy and the economic evaluation of the solutions used in the refinancing. The Company chose to pursue a bilateral exchange structure in the final piece of the refinancing to ensure execution and pricing efficiencies on both the tender of the existing bonds and issue of new bonds.

Partner Geoff Knight, who led the Centrus team working on the transactions commented The strategy to use the bilateral deferred draw loans to materially reduced the refinancing requirement before accessing the public markets worked well in ensuring a competitively priced public bond transaction while also diversifying the lender base and extending the duration of the Company’s Class B liabilities
Adrian Hunt, Group Treasurer and Head of Tax and Treasury at Yorkshire Water said We set ourselves some challenging objectives in this Class B refinancing. Sterling fixed income investors were incredibly supportive of the Company and the resulting new public bond issue, pricing as it did, is a great result for us. I would like to thank all of our partners, including Barclays, RBS, Santander GCB and other advisors for their professionalism and dedication in helping us to complete these transactions