Grainger is aiming to amend its borrowing powers following an increase in its level of debt and a fall in the value of its properties.
The UK’s only listed residential landlord is asking shareholders to approve a doubling in the multiple of its debt to its adjusted capital and reserves.
It is currently allowed to have two and a half times as much debt as capital and reserves.
It wants to increase this to five times, a figure, it claims, ‘which is used by some other real estate companies with a high level of trading activities’.
It also wants approval to change the definition of its capital and reserves to refer to the vacant possession value of its properties rather than the investment value, which is the current position.
‘The business model of the group is based upon holding tenanted residential property until it becomes vacant and then selling such property to realise the vacant possession value,’ Grainger said.
‘Borrowings of the group will be serviced and repaid from the sales proceeds of these vacant properties.’
Grainger’s debt at 30 September 2007 was £1.33bn, just 1.4 times the adjusted capital and reserves of £966m.
However, by 31 July 2008 the debt had increased to £1.65bn with £400m of headroom, while capital and reserves are likely to have dropped as a result of the slump in the housing market.
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