The silly season arrived early this weekend with news in The Independent of a possible tie-up between the Nigerian and London stock exchanges. An idea that may not appeal to LSE chairman, Chris Gibson-Smith. But wearing his hat as chairman of British Land, Dr Smith, will have approved plans, reported in the FT today, for BL to raise up to $500m from the US bond market. Why so much money, and why in dollars?
The answer, in most cases, is that the new money is cheaper than the old money. In other words it's all about remortgaging, or, in official language, "debt restructuring." In this case, BL hints the new money will cost the bank rate plus 1.5%. That sounds a good deal for anyone remortgaging a house: as it would to anyone looking for cash to build an extension, someone who can't get cash from the High Street bank.
BL has gone to Wall Street to get a better bond rate. What will they do with the money? The answer is probably an impossibly complicated mix of re-mortgaging - plus extension building. Lots of money is needed to build the Cheesegrater tower on Leadenhall and a new HQ for UBS at Broadgate: here the 28 day period for English Heritage to object to being overruled on the listing of the existing buildings expires in a matter of days.
BL will be paying half the £460m cost of UBS building, say £230 million. They will be paying half the £340m bill for the 736ft Leadenhall Tower, another £170m. That's a total of £400m sterling - or more than $600m on just two buildings due to complete over the next four years. Wall Street was originally asked for $200m but is now giving $500m, presumably at the expense of the City and, er, the London Stock Exchange.