LONDON (ShareCast) - Property asset manager Capital and Regional has revealed details of its rescue plans for its troubled fund, The Mall Unit Trust.

The company plans to raise £286m to pay off the trust’s existing banking facility with Royal Bank of Scotland in full, by way of an open offer at 101p per unit.

The offer price represents a 45% discount to the April unit price.

The cash is needed to prevent the fund from breaking its covenants. At the end of March the Mall portfolio’s loan to value (LTV) ratio (gross debt/property value) was running at 59%, just one percentage point below the covenant threshold.

The open offer has been backed by Norwich Union Life and Pensions and CGNU Life Assurance, thus ensuring the company will receive the cash, regardless of the response to the open offer.

The news gave a lift to the stock’s share price but Arbuthnot Securities was not impressed, and cut its rating on the stock to “neutral” from “buy”, observing that full subscription by Capital & Regional to the offer would lift its debt to equity ratio to 1.17:1.

Capital & Regional, which owns 24% of the fund, said it remains committed to the Mall and its franchise but did not rule out the possibility of not subscribing in full to the offer.

If the company chooses not to participate in full “the new equity in the Mall will have a beneficial impact on Capital & Regional's financial resilience, but at a potential cost of up to 60 pence per share due to the effect of dilution,” the company said.

• News Channel