Tesco is selling around £450m of its properties which will be financed by the first property securitisation for two years.

The supermarket giant is carrying out a £450m sale-and-leaseback transaction as part of its £5bn programme of property disposals that it began in 2006.

The sale involves it issuing around £415m of commercial mortgage-backed securities (CMBS) through a special purpose vehicle, Tesco Property Finance 1. Arranged by Goldman Sachs, the issue represents a ‘true-sale securitisation’ of two loans, secured by 12 supermarkets and two distribution properties let on long-term leases guaranteed by Tesco. Rental uplifts are fixed at 2.5-5% for the first five years and are RPI-linked afterwards.

The bonds are fully credit-linked to Tesco’s corporate rating, which is currently A-. They will amortise fully by their 30-year maturity, leaving no residual risk to investors.

‘We would see a successful placing of these bonds as a positive sign for the long-term viability of the European CMBS sector,’ said Hans Vrensen, head of securitisation research in Europe at Barclays Capital.

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