Invista European Real Estate Trust Full Year -22-

As at 30 September 2014, the Group had EUR217.9 million of outstanding indebtedness with BREDS (2013: EUR229.7 million with BOS). The Company's LTV (gross debt divided by market value of properties) under the BREDS loan documentation at that date was 77.3% (2013: 70.6% with BOS), against a covenant of 85.0% (2013: 70.0% with BOS). The LTV is calculated based upon the market value of the properties as at 30 September 2014.

Terms and debt repayment schedule

 
                                                 30 Sep 14   30 Sep 13 
                                                    EUR000      EUR000 
---------------------------------------------  -----------  ---------- 
 Proceeds 
 Bank loans maturing between one to five           217,888           - 
  years 
 Bank loans maturing less than one year                  -     229,737 
---------------------------------------------  -----------  ---------- 
 Total proceeds from long term bank loans          217,888     229,737 
---------------------------------------------  -----------  ---------- 
 Transaction costs 
 Costs 
 Balance at the beginning of the year                7,186       7,535 
 Additions during the period                        10,230           - 
 Retirements and amounts written off               (8,705)       (349) 
---------------------------------------------  -----------  ---------- 
 Gross transaction costs balance at the 
  end of the year                                    8,711       7,186 
---------------------------------------------  -----------  ---------- 
 Amortisation 
 Balance at the beginning of the year                7,079       6,585 
 Amortisation during the year                        1,351         843 
 Retirements and amounts written off               (7,186)       (349) 
---------------------------------------------  -----------  ---------- 
 Accumulated amortisation balance at the 
  end of the year                                    1,244       7,079 
---------------------------------------------  -----------  ---------- 
 Net book value of transaction costs                 7,467         107 
---------------------------------------------  -----------  ---------- 
 Net book value of proceeds from bank loans        210,421     229,630 
 Less current portion of bank loans                      -   (229,630) 
---------------------------------------------  -----------  ---------- 
 Net book value of bank loans net of current       210,421           - 
  portion 
---------------------------------------------  -----------  ---------- 
 
 

Transaction costs incurred in refinancing the above loans are initially deducted from the loan balance and are being amortised over the extended period of the loan. Amortisation of transaction costs recognised as finance costs amounted to EUR1.4 million for the year ended 30 September 2014 (2013: EUR0.8 million). Finance costs include debt arrangement, structuring, utilisation fees and exit fees paid in arranging the debt facility and the preference shares. All transaction costs related to the old loan with BOS were written off in full.

All borrowings are denominated in euro. The weighted average interest rate at 30 September 2014 on the bank borrowings was 5.454% (2013: 2.726%). The loan is collateralised by all properties of the portfolio included under "Investment property" and "assets held for sale" accounts (see notes 12 and 30).

 
 
                                                                                   30 Sep 14                 30 Sep 13 
----------------  ------------  ----------------  ----------------  ----------  ------------  ----------  ------------ 
 
                      Currency           Nominal           Date of        Face     Carrying       Face       Carrying 
                                        interest          maturity       Value      Amount        Value       Amount 
                                            Rate                        EUR000      EUR000       EUR000       EUR000 
----------------  ------------  ----------------  ----------------  ----------  ------------  ----------  ------------ 
 Bank of America                      3M Euribor 
  Merrill Lynch           Euro            +2.40%        30/04/2017     100,000       100,000           -             - 
----------------  ------------  ----------------  ----------------  ----------  ------------  ----------  ------------ 
 Islay 
  Investments                         3M Euribor 
  S.à r.l.           Euro        +12.04426%        30/04/2017     117,888       117,888           -             - 
----------------  ------------  ----------------  ----------------  ----------  ------------  ----------  ------------ 
 Bank of 
  Scotland 
  Secured bank                        3M Euribor 
  loan                    Euro            +2.50%        31/12/2013           -             -     229,737       229,737 
----------------  ------------  ----------------  ----------------  ----------  ------------  ----------  ------------ 
 Total                                                                 217,888       217,888     229,737       229,737 
------------------------------------------------  ----------------  ----------  ------------  ----------  ------------ 
 
   22.        Interest bearing loans and borrowings exit fee 

The current facility agreement does not attract an exit fee. As part of the previous facility agreement with Bank of Scotland there was an exit fee payable. The fee was calculated as 2% of the weighted average drawn balance during the period commencing on the issuance date through the final repayment of the facility, 31 December 2013 (or repayment date if earlier). The quantum of this exit fee was settled in full under the revised terms to the tune of EUR5.9 million 30 April 2014.

 
                                    Current liabilities   Current liabilities 
                                              30 Sep 14             30 Sep 13 
                                                 EUR000                EUR000 
 Interest bearing loan exit fee                       -                 5,988 
--------------------------------  ---------------------  -------------------- 
 

On 30 December 2009 the Company issued 29,137,134 redeemable preference shares with one warrant attached per preference share. The preference shares confer the right to a cumulative preference share dividend payable semi-annually. As the preference shareholders have a right to receive a dividend and are redeemable, they are treated as a financial liability.

In addition, on 30 December 2009, the Company issued 29,137,134 warrants whose option to exercise expired in November 2013.

 
                                                    30 Sep    30 Sep 
                                                        14        13 
                                                    EUR000    EUR000 
------------------------------------------------  --------  -------- 
 Preference shares at the beginning of the year     32,020    32,940 
 Transaction costs amortisation                        328       328 
 Preference shares held in treasury                      -       189 
 Derecognition of repurchased preference shares      (198)         - 
 Foreign exchange difference                         2,754   (1,437) 
------------------------------------------------  --------  -------- 
 Preference share value at the end of the year      34,904    32,020 
------------------------------------------------  --------  -------- 
 

Costs

Transaction costs amortisation represents the amortisation of the cost of raising preference share capital (7 years).

The holders of preference shares are entitled to receive a preferential cumulative dividend of 9% per annum of the preference share issue price of GBP1.00. The preference dividend is payable semi-annually in June and December each year from 2010 to 2016 inclusive.

Under the terms of the new debt, a cash sweep will be applied to the Company's income prior to the Step-Down Event (note 2.2). As a consequence, no distributions to ordinary or preference shareholders can be made for the duration of the cash sweep, with the preference share dividend therefore being accrued. The Company regards making the repayments necessary to eliminate the cash sweep as an objective of the highest priority. The accrued amount of preference share dividend as at 30 September 2014 was EUR2.5 million (note 26).

Preference shares held in treasury

In July 2012, the Company repurchased 800,000 of its own preference shares, denominated in GBP, at a purchase price of 95 pence per preference share. The full amount of the share buy back was derecognised against the Preference shares.

   24.        Warrants 

On 30 December 2009 the Company issued 29,137,134 warrants. Each warrant holder was entitled to exercise their subscription right in cash on any subscription date falling in the years from 2010 to 2013 inclusive. The subscription date in any year was the last business day in May and the last business day in November. The subscription price was GBP0.29 per ordinary share. As the exercise price for the warrants was set in sterling as opposed to the functional currency of the Company, which is euro, the warrants were treated as a financial liability. The entitlement to exercise the subscription in cash expired in November 2013.

 
                                                     30 Sep    30 Sep 
                                                         14        13 
                                                     EUR000    EUR000 
-------------------------------------------------  --------  -------- 
 Warrant fair value at the beginning of the year        176       219 
 Warrants exercised during the year (refer to 
  the statement of change in equity)                      -         - 
 Fair value movement of the warrants (note 28.5)      (176)      (34) 
 Foreign exchange difference                              -       (9) 
-------------------------------------------------  --------  --------