Solving corporate finance problems with securitization.

• Position: Letter from the Editors - Letter to the Editor

1. MATCHED FUNDING

   Securitization of leases of commercial property to refinance bank debt and secure long term capital market funding that matches the tenor of their assets, has recently been used by British Land and Canary Wharf. Long term asset backed notes have been issued to refinance commercial properties.

   "Our major financing event has been the post year-end Pound (L) 1.54 billion securitisation, arranged by Morgan Stanley Dean Witter and supported by cash flows from the Broadgate Estate. L1.54 billion quite a large number -- represents 73% of the value of the Broadgate assets which have been securitised, reflecting the quality and strength of the long-term underlying leases. The secured element of the Notes is limited to L100 million and there is no recourse to British Land itself, the Notes being obligations of fully ring-fenced subsidiaries. The issue allows British Land to manage its Broadgate business and assets in an effective and financially efficient manner for the foreseeable future, and there is a range of maturities extending out to 2038 with significant early repayment flexibility. Our recent Broadgate building purchases (100 Liverpool Street, 155 and 175 Bishopsgate) were at yields of 7% while the funding cost of the securitisation is 6.15%. . . .During the year we also added a L110 million unsecu red syndicated revolving facility arranged by WestLB Bank and, since the yearend, we increased the amount of the 135 Bishopsgate securitisation to L137.8 million.

   Following successful completion of the securitisation we have pushed the weighted average maturity of our borrowings, excluding the joint ventures, out to 23 years (1998 -- 19.9 years) and the weighted average interest rate is down to 7.3% (1998-8.49%). . .In April 1999, the Group announced the launch of the L1,540 million fixed rate Broadgate (Funding) PLC Notes. The proceeds of the securitisation are being used to repay bank debt on revolving facilities, which are then available for redrawing. As part of the securitisation, surplus derivatives which previously hedged bank debt have been closed out resulting in the L68 million exceptional item. Following this innovative financing the Group debt is predominately fixed, although it is expected that the position will revert to a proportion of variable rate in the near term". (British Land PLC, 1999 Annual Report and Accounts)

2. CORPORATE FINANCE: PRIVATIZATIONS AND ACQUISITIONS

   In addition to the direct application of...